KUALA LUMPUR: - The latest rating by Fitch Ratings on Malaysia's outlook sparks positive sentiment in the local foreign exchange market, lifting the ringgit higher against the US dollar this morning.

Hong Leong Investment Bank (HLIB) economist, Sia Ket Ee, said the upgrade, which came in as a surprise as the market had broadly expected a one-notch rating cut, helped ease the pressure on the ringgit.

"There are handful of factors that put the ringgit under pressure, including the threat of Fitch downgrade, slump in global oil and commodity prices and the uncertainty in international monetary policies.

"With the upgrade by Fitch, we have taken one of the uncertainties out," he told Bernama.

The ringgit opened firmer at 3.7330/7380 against the greenback from 3.7740/7770 quoted at yesterday's close.

Fitch affirmed Malaysia's long-term foreign currency Issuer Default Rating (IDR) at 'A-' and local currency IDR at 'A'.

The outlook on the long-term IDRs was revised to stable from negative.

Fitch said the stable outlook reflected its assessment that upside and downside risks to the ratings are currently broadly balanced.

Out of the seven rating drivers, three are defined positive, namely improving fiscal finances, favourable gross domestic product (GDP) growth rate and fiscal financing flexibility.

The rest - weaker external liquidity; declining current account surplus; rising contingent liabilities; and weaker average income level, were viewed as negative indicators.

"We maintain the ringgit forecast range at RM3.55-RM4.00 against the US dollar for the second half of 2015, with a midpoint forecast at RM3.70," Sia said.

He expected the local currency to trade at RM3.70 versus a greenback by year-end.

Nevertheless, Sia said the broader issue of divergence in monetary policies in major economies such as the US interest rate, the Eurozone debt crisis as well as declined liquidity in Japan, would continue influence the movement of ringgit going forward.

"Although the prices of global oil has recovered, Malaysia is still exposed to the volatility in the commodity prices," he added.

Sia added that Bank Negara would likely keep its overnight policy rate unchanged at 3.25 per cent this year, given the moderate GDP growth outlook, manageable inflation and the country's financial imbalances. -- BERNAMA