Ringgit continues to scramble for stability amid Covid-19

By SHAZNI ONG / Pic By BLOOMBERG

THE economic turmoil wrought by the Covid-19 pandemic is likely to add angst to the ringgit and other major regional currencies as investors continue to seek shelter in the safe-haven greenback.

The local unit is expected to hover between RM4.30 and RM4.40 against the US dollar in the immediate term.

“The disease was officially designated as pandemic by the World Health Organisation (WHO) on March 11. Prior to that, cases outside China have rapidly increased, such as in Italy, South Korea, Iran and now, the US is claiming the top spot in terms of cumulative number of Covid-19 cases,” Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid told The Malaysian Reserve.

The WHO indicated that the hospitalised coronavirus cases in Malaysia are expected to peak in mid-April, while there are signs of the flattening of the infection curve.

“The number of new cases will be closely scrutinised by the markets. Thus far, it has come down slightly to 140 as of yesterday from 156 previously.

He said if the curve continues to flatten and the Movement Control Order (MCO) ends by April 14, that could give some respite to the US dollar/ringgit.

“Then we have seen a series of warnings from the International Monetary Fund that global output in 2020 will contract, while the World Bank also came up with a similar tone, saying that the prospect of a global financial shock and recession would hurt the develop- ing economies in East Asia and the Pacific,” he further said.

Along with other major regional currencies, the ringgit knocked up by surging US dollar as investors started to hoard on the greenback to hedge investment in the riskier global financial climate.

“The US dollar/ringgit has depreciated by 6.5% on a year-to-date basis. In the near term, it’s going to be a very choppy trade for the ringgit.

“Last week, we saw the US jobless claims go up the roof as 3.28 million new claims for unemployment insurance was recorded. We can now see the US Institute for Supply Management Index for the manufacturing sector fall to 49.1 points in March after staging above the 50-point demarcation line for two consecutive months.

“And other Purchasing Managers’ Index indices have been disappointing too, except China which saw some swift recovery in terms of business sentiments,” he said.

Hence, Mohd Afzanizam opined that the US dollar/ringgit could gyrate between RM4.30 and RM4.40 in the immediate term.

The ringgit had opened lower against the US dollar yesterday morning as worries of an extension of the MCO drove investors to seek shelter in the greenback.

At 9.05am, the local note stood at 4.3750 against the US dollar compared to Wednesday’s close of 4.3500/3650.