The ringgit will likely remain bias on the downside as the Covid-19 situation is expected to worsen this week

by FARA AISYAH/ pic by BLOOMBERG

THE ringgit is expected to remain weak as the Covid-19 pandemic and falling oil prices continue to impact investors’ confidence.

The ringgit fell to its lowest since 2017 to 4.4485 yesterday, falling 1.24% as the global markets rout continues and investors move into cash and safe havens while waiting for fresh stimulus measures to be unveiled.

Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the risk-off mode is still rampant by far.

“The US dollar index has gone up beyond the 100 points for quite some time now. The VIX index and the 10-year US Treasury yields have come down to below 1%, while the S&P 500 futures market has been lower compared to the cash markets.

“Therefore, the US dollar/ringgit will continue to be under pressure. We foresee the US dollar/ringgit will continue to linger at this level in the immediate term,” he told The Malaysian Reserve.

Mohd Afzanizam said markets are looking at the latest numbers on jobless claims figures released by the US Department of Labour for last week in order to gauge the real impact to the US economy.

China’s statistics have been really bad with the fixed assets investment, retail sales and industrial production index plunging to -24.5%, -20.5% and -13.5% respectively for the month of January and February.

“So the risk-off mode is going to prevail in the immediate term. That would mean emerging markets currencies will stay weak including the ringgit,” Mohd Afzanizam added.

AxiCorp Financial Service Pte Ltd chief market strategist Stephen Innes said the ringgit will likely come under further selling pressure on domestic economic concerns, in addition to the backdrop of a stronger US dollar.

“Oil prices are under extreme pressure relative to 2018 and 2019, so the ringgit to oil price sensitivity will continue to provide a significant downdraft.

“Bank Negara Malaysia will most unlikely drawdown on valuable US dollar reserves to support the ringgit since the demand from local banks for dollars is robust,” he said in a note yesterday.

Kenanga Investment Bank Bhd said in a research report yesterday the ringgit will likely remain bias on the downside as the Health Ministry expects the Covid-19 situation to worsen this week, with tighter enforcement of the Movement Control Order exerting pressure on the economy.

“Technically, the overall chart setup remains bullish for the ringgit. We see an immediate support at 4.330, though a break below 4.266 could be a tipping point. On the upside, a break above 4.436 is needed for a US dollar rally to take shape,” it added.