“Nevertheless, the actual US dollar/ringgit has moved below these levels (last week at RM4.685).

“Again, we repeat that our model already suggests the current fair value of the US dollar/ringgit is about RM4.50/RM4.60,” it said in a research note.

It also said Malaysia’s economic fundamentals remain solid, as the ringgit opened higher at RM4.67 versus the greenback today from yesterday’s closing of RM4.68.

“Aiding the sentiment for the local currency and continuing the advantageous repositioning of the currency in the short term is Bank Negara Malaysia’s (BNM) stable and consistent monetary policy direction which pacifies the market,” it said.

Additionally, the US Federal Reserve (Fed) is anticipated to cut the Federal Fund Rate by the second or third quarter of this year.

“No less important were coordinated efforts by the central bank to boost inflows from abroad,” it said.

The research house said the weakening of the US Dollar Index and the undervaluation of the ringgit have spurred forex conversions into the local currency, as evidenced by the reversal in forex foreign currency deposits compared to total deposits.

AmBank Group said BNM has maintained the overnight policy rate (OPR) at 3%, and anticipates that the central bank will maintain the OPR at the current level throughout this year despite the ongoing supply-side interventions.

“Malaysia’s economic fundamentals remain solid and far from a recession, unlike in advanced economies. The expected smaller interest rate differentials and the Fed’s clear signal of an impending rate cut are positive on the ringgit.

“We maintain our year-end forecast of RM4.50 with a possible downside of RM4.60 per dollar,” it added.