Press Release 2016

UOB Malaysia expects the ringgit to rebound in 2016

Malaysia's 2016 recalibrated budget and a gradual US interest rate hike path should spur the rebound

Kuala Lumpur, Malaysia, 22 February 2016 - United Overseas Bank (Malaysia) Bhd (UOB Malaysia) expects the ringgit to rebound in the second half of 2016, providing much-needed relief to Malaysian companies and consumers who heavily rely on imported goods.

According to UOB Malaysia economist Ms Julia Goh, the market has responded relatively well to Malaysia's new fiscal measures introduced as part of the country's revised 2016 budget, which was announced in January 2016. The Malaysian government's move to improve the country's fiscal position and a weaker dollar are contributing to the ringgit's strength.

"The ringgit, up by six per cent1 against the dollar since its weakest point in the third quarter of 2015, strengthened against most major and regional currencies to become one of the strongest performing Asian currencies in the first six weeks of 2016. The ringgit's rally has been aided by funds repatriated from abroad and Bank Negara Malaysia's efforts to boost domestic liquidity by reducing the statutory reserve requirement (SRR) ratio to 3.5 per cent."

"In the coming months, we expect the ringgit to continue to be supported by the country's diversified export base, sustained current account surplus and the government's ability to manage fiscal risks from weaker oil prices," Ms Goh said.

Touching on external factors, Ms Goh added that efforts by the Chinese authorities to ensure a stable renminbi and the United States Federal Reserve's more gradual interest rate hike cycle will continue to support the local currency's firm footing in 2016.

"The conditional agreement to hold oil production steady by the world's largest producers should also help to support the ringgit further. However, growth headwinds, external geopolitical risks and the thin onshore ringgit market could result in short periods of volatility.

"We will continue to monitor the markets closely and look for fresh factors that may affect the ringgit's resilience in the year ahead," Ms Goh said.

Ms Goh will also be presenting her views on the Malaysian economy and the ringgit at the UOB Malaysia Global Markets Corporate Seminar and Market Outlook for 2016 on 25 February 2016. She will be joined by Mr Jimmy Koh, Head of Global Economy and Markets Research, United Overseas Bank (Singapore) Limited.

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1 As at 19th February 2016 the ringgit was trading at 4.32 against the dollar. As at 29 September 2015 the ringgit trading at 4.48 against the dollar.

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