KUALA LUMPUR: Analysts say the ringgit is likely near its weakest point against the US dollar with a correction in the offing.
"Given the stronger US economy and the potential for higher (treasury) yields, the short-term pressure could exert negative pressure on the ringgit. As a result, we may witness an overshoot to 4.78-4.80 against the US dollar," SPI Asset Management managing director Stephen Innes told Business Times.
Looking beyond short-term fluctuations, however he said the Fed's rate-cutting trajectory for this year hinged on inflation cooperating, as in the past six months.
Therefore, he said it was reasonable to assume that the ringgit was either at or very near its weakest level against the greenback.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said a correction was in the offing as the ringgit was oversold from a technical analysis point of view.
"I believe that the ringgit is poised to stage a rebound given that China's government is likely to come up with a forceful economic stimulus," he added.
The ringgit hit an all-time low of 3.5518 against the Singapore dollar and touched a day's high of 4.765 against the US dollar yesterday.
At 5pm, the ringgit was trading at 3.5405/3.5455 against the Singapore dollar and 4.757/4.762 against the greenback.
Meanwhile, on the performance of the Singapore dollar against the ringgit, Innes said the Monetary Authority of Singapore (MAS) tended to keep its policy band on an appreciation tangent these days to ward off imported price pressure.
"Hence, the Singapore dollar tends to hold up well, even on bouts of US dollar strength.
"The ringgit is lagging Asian foreign exchange, likely due to the political clouds that seem to hang over the local currency market," he said.
Afzanizam said MAS managed its monetary policy via the Singapore Dollar Nominal Effective Exchange Rate.
While its currency composition is not disclosed to the public, it likely includes the US dollar, as the US is one of Singapore's key trading partners.
"So when US dollar rises against the ringgit, the Singapore dollar would effectively strengthen," he added.