AUD/MYR forecast: Can Malaysian ringgit find strength in rosy tourism outlook?
The Australian dollar (AUD) has rebounded against the Malaysian ringgit (MYR) in the past week, after third-quarter inflation in Australia came in above expectations and as Malaysia’s general election approaches.
The Aussie is trading up by 1% against the MYR year-to-date, after high volatility took the currency up by 6.6% in June and down by 2.8% earlier this month.
What drives the AUD/MYR exchange rate and what is the outlook for the rest of 2022 and beyond?
In this article, we look at the recent performance of the Australian dollar against the Malaysian ringgit and some of the latest forecasts from foreign exchange (forex) analysts.
What drives AUD/MYR?
In forex trading, currencies are dealt in pairs that value a quote currency against a base currency. The AUD/MYR refers to the number of Malaysian ringgit – the quote currency – needed to buy one Australian dollar – the base currency.
The Australian dollar, known as the Aussie, is the world’s fifth most actively traded currency, although Australia’s economy is the 12th largest. The Aussie is traded as a commodity currency, along with the likes of the Canadian dollar (CAD) and the New Zealand dollar (NZD), as Australia is a key exporter of raw materials such as iron ore, coal, oil and gas products and industrial metals.
The mining sector accounts for 11.5% of the Australian economy and natural resources for 68.7% of its exports. The value of the Australian dollar is strongly influenced by commodity prices as well as the performance of the Chinese economy, with China accounting for 36.5% of its exports.
Malaysia has the third largest economy in southeast Asia, and the 33rd largest in the world, according to International Monetary Fund (IMF) data. Malaysia is the world’s second largest exporter of palm oil products after neighbouring Indonesia, and is among the top five exporters of rubber products, with its exports reaching a record high in 2021.
The value of the ringgit is affected by the growth of the Malaysian economy, including gross domestic product (GDP), trade flows, commodity prices, industrial activity and government policy on exports and spending, as well as monetary policy on interest rates to manage inflation.
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Macro uncertainty drives AUD/MYR volatility
The AUD/MYR exchange rate has been volatile in 2022, as the Russia-Ukraine conflict, high inflation, rising interest rates led by the US and China’s ongoing zero-Covid policy have roiled currency markets.
The AUD/MYR pair started the year at 3.00, rising above 3.18 in April. The pair dropped back to 3.07 in early May and quickly spiked to 3.16, before dropping back to 3.01 on 12 May. Another rally took AUD/MYR back up to 3.20 in early June, but by the middle of the month it retreated to 3.04. A spike to 3.09 was followed by a further decline to 2.98 on 11 July.
The AUD/MYR climbed to 3.17 on 12 August, then turned into a downward trend, reaching 2.92 on 14 October, its lowest level since May 2020. But the Aussie has since bounced up, with the pair trading at 3.07 on 27 October.
The Reserve Bank of Australia (RBA) surprised the markets on 4 October by raising its benchmark interest rate by 25 basis points (bps) rather than 50 bps, to 2.6%. The central bank stated that it expects “further increases are likely to be required over the period ahead” to bring down inflation.
“As is the case in most countries, inflation in Australia is too high. Global factors explain much of this high inflation, but strong domestic demand relative to the ability of the economy to meet that demand is also playing a role,” the RBA stated.
Data from the Australian Bureau of Statistics (ABS) on 26 October showed that inflation rose by 7.3% year on year during the third quarter, which was above consensus estimates of 7% and its highest rate since 1990. That could see the RBA re-evaluate its dovish turn.
While the value of the Australian dollar is affected by the Chinese yuan renminbi, there is also a strong correlation between the Malaysian ringgit and the renminbi, with the AUD/MYR exchange rate following a similar pattern to AUD/CNY.
“MYR weakness was largely driven by exogenous factors, including the sharp rise in UST yields, USD strength, sharp and continued decline in CNH (of which MYR has a strong correlation to), IMF’s downgrade of global growth, risks of China slowdown amid extended lockdowns and ongoing war in Ukraine (sentiment, china proxy play),” analysts at Malaysian bank Maybank note. China accounts for around 40% of Malaysia’s exports.
The Chinese currency has weakened with the confirmation of President Xi Jinping's third five-year term, on growing concerns that his policies will result in a slowdown of China’s economic growth, which has been a major driver of the global economy.
Malaysia’s headline consumer price index (CPI) inflation rate moved down to 4.5% year on year in September from 4.7% year on year in August as a rise in food prices slowed, while core CPI inflation rose to 4% from 3.8%, pointing to demand-driven price pressures.
On 19 October, Malaysia’s election commission scheduled a general election for 19 November, which could see volatility increase over the next month.
Bank Negara Malaysia raised its key policy rate by 25 bps to 2.50% on 8 September and analysts at MIDF expect another 25-bp rise at the next meeting on 3 November. The central bank stated.
Malaysia’s tourist arrivals soared to 2.03 million in the second quarter as it reopened its international borders, according to data from Tourism Malaysia. The Minister of Tourism, Arts and Culture (MOTAC) has revised up its target for tourist arrivals for the year to 9.2 million, up from 3.2 million previously, bringing in revenues of MYR26.8bn.
How will the Australian dollar perform against the Malaysian ringgit in the future? Will the pair strengthen further or will the ringgit regain ground?
AUD/MYR forecast: How will the Aussie trade against the ringgit?
Technical analysis from HongLeong Bank (HLB) was “slightly bullish” in its short-term Australian dollar to Malaysian ringgit forecast. According to the bank’s commentary on 27 October:
There was support at 3.03 and 3.05, with resistance at 3.08 and 3.092.
HLB’s longer term AUD/MYR forecast for 2022 projected that the pair could weaken to end the year at 2.90. The Aussie could then move up to 2.96 by the end of the second quarter of 2023, but move back to 2.94 by the end of the third quarter.
The AUD/MYR prediction from Australia’s Westpac saw the pair ending the year at 2.93 and reaching 2.90 in the first quarter of next year. The rate could then weaken further to 2.88 in the second quarter before rebounding later in the year to reach 3.07 by mid-2024, pointing to a bullish AUD/MYR forecast for 2025.
At the time of writing (28 October), the AUD/MYR forecast from Trading Economics indicated the pair could retreat to 2.97665 by the end of this quarter and at 2.85003 in one year, based on global macro model projections and analysts’ expectations.
In contrast, Maybank’s AUD/MYR forecast estimated that the Aussie could strengthen to 3.08 against the ringgit by the end of the year, and reach 3.12 by the third quarter of 2023.
| Q4 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 | Q2 2024 | |
| HongLeong Bank | 2.90 | 2.92 | 2.96 | 2.94 | - | - | - |
| Maybank | 3.08 | 3.06 | 3.11 | 3.12 | - | - | - |
| Westpac | 2.93 | 2.90 | 2.88 | 2.90 | 2.99 | 3.02 | 3.07 |
Source: HongLeong Bank, Maybank, Westpac
Given the unpredictability of forex markets over the long term, analysts have yet to issue an AUD/MYR forecast for 2030.
The bottom line
If you are looking for an AUD/MYR forecast to inform your forex trading, it’s important to remember that currency markets are highly volatile, making it difficult for analysts and algorithm-based forecasters to come up with accurate long-term predictions. As such, analysts can and do get their predictions wrong.
We recommend that you always do your own research. Look at the latest market trends, news, technical and fundamental analysis, and expert opinion before making any investment decision. Keep in mind that past performance is no guarantee of future returns. And never invest money you cannot afford to lose.
FAQs
Why has AUD/MYR been rising?
The Australian dollar has turned higher against the Malaysian ringgit after falling to a two-year low, as higher than expected inflation could prompt the Reserve Bank of Australia to continue raising interest rates at a faster pace than intended.
Will AUD/MYR go up or down?
The direction of the AUD/MYR exchange rate could depend on, among other factors, monetary policy in Australia and Malaysia, as well as the health of the Chinese economy, which is an important destination for both countries’ exports.
When is the best time to trade AUD/MYR?
The best time to trade on forex markets is around the release of major economic announcements, such as trade data, inflation and interest rates.
You can trade currency pairs, including AUD/MYR, around-the-clock. However, there are certain times when forex trading is most liquid. This usually occurs around the release of major economic announcements, such as trade data, inflation and interest rates, which often tends to drive volatility on forex markets higher. Keep in mind that high volatility increases risks of losses.
Is AUD/MYR a buy, sell or hold?
How you trade the AUD/MYR pair is a personal decision that depends on your trading strategy, risk tolerance and investing goals. You should do your own research into the economic data, government policies and other factors that drive the exchange rate to make an informed decision. Keep in mind that past performance is no guarantee of future returns. And never invest money you cannot afford to lose.
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