(Bloomberg) -- Malaysia’s central bank said the ringgit is undervalued and should be stronger given the nation’s positive economic outlook.

“The ringgit ought to be traded higher,” Abdul Rasheed Ghaffour, Bank Negara Malaysia’s governor, said in a statement Tuesday.

This is the second time in a week that the monetary authority has expressed concerns over the local currency’s weakness following its slide to a 26-year low. Malaysian Prime Minister Anwar Ibrahim said last week the government has assigned the central bank to monitor the currency’s fluctuations.

The central bank has stepped up its engagements with government-linked companies, corporates and investors “to encourage continuous inflows to the foreign exchange market,” the central bank governor said.

The ringgit was steady at 4.7788 per dollar on Tuesday, after slipping past 4.8 last week to the weakest level since January 1998.

Sputtering growth in China, Malaysia’s biggest trading partner, has weighed on the export-reliant economy. Economists have trimmed their forecasts for 2024 gross domestic product growth to 4.3% from 4.5%, after last year’s expansion missed estimates.

Goldman Sachs Group Inc. analysts said Bank Negara is unlikely to heavily defend the ringgit, given its “moderate level of foreign-exchange reserves.” 

“As such, we think there is scope for the ringgit to weaken further,” analysts including Rina Jio wrote in a note Monday. A combination of weak domestic fundamentals, exporter hoarding of dollars, lower foreign direct investment inflows and persistent portfolio outflows also weighed on the currency.

Malaysia held about $115 billion of foreign reserves as of mid-February, above the five-year average. While Goldman did not provide a forecast for the ringgit, its stance adds to a growing view among analysts who are expecting the currency’s slide to continue. 

The reimposition of export conversion rules, heavy dollar selling by exporters or a turnaround in investment flows may change the bearish narrative on the ringgit, according to Goldman.

(Adds comments from Goldman Sachs.)

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