Ringgit expected to see further declines next week ahead of US interest rate hike decision

The ringgit is expected to see further declines next week against the greenback at around the 4.50-4.60 levels on a lack of catalysts and ahead of the US central bank decision on interest rates, said an analyst. 

Amid rising inflation worries, including in emerging market (EM) economies, investors are holding off on their buying interest in EM assets and would remain focused on safe-haven assets such as the US dollar, she said. 

The expectation of another increase in the interest rate by the US Federal Reserve (Fed) in the Federal Open Market Committee (FOMC) meeting next week is also weighing on the ringgit.

“The ringgit needs a fresh boost to attract buying interest from investors. But now, we think investors may take a wait-and-see approach for the ringgit, until Budget 2023 is announced, which is scheduled to be tabled on Oct 7, 2022. 

“(However,) Malaysia’s economy is still doing well, given that fundamentals are strong and debt levels are manageable,” she told Bernama. 

During the week, Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz, in his social media postings, said that Malaysia is not experiencing an economic crisis just because the ringgit is trading at a low level against the US dollar.

He explained that the ringgit’s performance should be viewed holistically, not just in comparison with the US dollar, as the local note has strengthened against other currencies.

Tengku Zafrul also stressed that the International Monetary Fund (IMF) never stated that Malaysia has economic problems that would cause the country to go bankrupt, instead it is confident of the country’s growth prospects.

Meanwhile, the ringgit hit another new low on Thursday, trading at 4.5340/5365 against the US dollar since the Asian Financial Crisis compared with 4.4965/4990 at last Friday’s closing.

For the shortened trading week, the local currency also traded mostly higher against a basket of major currencies.

It appreciated against the British pound to 5.2214/2242 from 5.2249/2278 and improved versus the euro to 4.5317/5342 from 4.5361/5386 this week. 

The ringgit rose against the Japanese yen to 3.1647/1666 from 3.1670/1690 but eased against the Singapore dollar at 3.2238/2261 from 3.2189/2209 a week earlier.

Markets were closed on Friday for the Malaysia Day celebration. — BERNAMA/TMRPic