KUALA LUMPUR (Jan 17): The ringgit is projected to trade between 3.8000 and 3.9000 against the US dollar by end 2018, amid stronger crude oil prices and in anticipation of Malaysia interest rate hikes, according Socio-Economic Research Centre (SERC) executive director Lee Heng Guie.

Lee said Brent crude oil prices, which have topped US$70 a barrel, is expected to average between US$60 to US$65 this year. In currency markets, the ringgit strengthened to 3.9525 against the US dollar at 1:31pm, after trading between 3.9435 and 3.9532 so far today.

"Along with stronger oil prices and recovery seen lately in the Malaysian ringgit, SERC is projecting the exchange rate to be at about 3.8000 to 3.9000 against the US dollar at the end of this year," Lee said at a press conference here.

Bank Negara Malaysia is expected to raise interest rates as early as next week during its monetary policy committee (MPC) meeting on Jan 25, 2018. Bank Negara's MPC had during its latest meeting on Nov 9, 2017 decided to maintain the overnight policy rate (OPR) at 3.00%.  

Today, Lee said Malaysia is ready for a rate hike. “Looking at the current economic environment, it is ready for a monetary policy review. Although economic growth is expected to moderate, it is mainly due to the high-base effect and at about 5%, it is still a credible growth," he added.

"At this level, the market is able to absorb a small rate hike of 25 basis points. I think next week, during the MPC meeting, the central bank will tinker with the possibility of a rate hike,” Lee said.

Looking ahead, he said the market needs to prepare for further Malaysia OPR hikes to a neutral level that will not discourage consumption, economic activity and investment. Further rate hikes here is possible if criteria, including steady economic growth and demand-induced price pressure, are met throughout 2018, Lee added.

According to Lee, Malaysia is projected to register gross domestic product (GDP) growth at 5.1% in 2018, compared with the estimated 5.8% to 6% expansion in 2017. Bank Negara is scheduled to announce the nation's 2017 fourth quarter and full-year GDP numbers on Feb 15, 2018.