Ringgit likely to extend downtrend next week

KUALA LUMPUR – The ringgit is likely to trend lower next week as the recent aggressive interest rate hike by the United States Federal Reserve (Fed) and its signal of more steep hikes going forward will continue to weigh on the currency, said an analyst.

“The demand for safe haven is expected to increase further, putting emerging market currencies, especially the ringgit, under pressure,” she told Bernama.

The ringgit hit another new 24-year low on Friday, trading at 4.5775/5800 against the greenback from 4.5340/5365 at last week Thursday’s close.

It breached the 4.57 level as the greenback continued to strengthen after the latest interest rate hike of a 0.75 percentage point by the American central bank to combat inflation that remains near a 40-year high.

Lower oil prices also weighed on the local currency.

UOB Kay Hian Wealth Advisors Sdn Bhd head of wealth research and advisor Mohd Sedek Jantan said as the dollar reaches new heights, export-oriented businesses will reap the rewards as their exports would be seen as relatively cheap.

During the week, Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz said a flexible ringgit exchange rate is an important policy in balancing the need to absorb external shocks to support domestic economic activity despite the financial market conditions and the uncertain global economic growth rate.

He explained that the government, through Bank Negara Malaysia (BNM), would always ensure stable and smooth financial market conditions and take proactive measures to provide adequate liquidity and resilient markets to ensure the stability of the ringgit.

Yesterday, BNM said it will continue to closely monitor and ensure orderly financial market conditions amid external developments that have led to persistent strength in the US dollar against almost all currencies, including the ringgit.

However, the central bank said that ringgit movements “will continue to be market-determined and the foreign exchange market continues to function and intermediate effectively.”

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

It climbed against the British pound to 5.0957/0985 from 5.2214/2242 and strengthened versus the euro to 4.4686/4710 from 4.5317/5342 last week.

The ringgit rose against the Singapore dollar at 3.2130/2152 from 3.2238/2261 but weakened against the Japanese yen to 3.2091/2113 from 3.1647/1666 a week earlier. – Bernama / pic Muhd Amin Naharul