Oanda Corp head of trading for Asia Pacific Stephen Innes said the majority of central banks within the Group of 10 are turning dovish, signalling a return of investment flows which should offset Malaysia’s risks to higher US interest rates and a stronger US dollar.
“More so given the trial and error approach the Fed will take to reduce the balance sheet, implying that regardless who takes the helm at the Fed, interest-rate normalisation may not deviate too far for from the current dot plot,” Innes said.
He said Malaysia’s 2018 budget allocation is positive for the ringgit as it is geared towards maintaining stability in both the foreign-exchange and bond markets through fiscal prudence.
“The financial burden of lower oil prices in 2017 will be offset by Goods and Services Tax receipts where income tax is anticipated to make up almost half of Malaysian government revenue amid robust economic growth,” he said, adding improving oil prices will also be viewed positively by markets.
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