KUALA LUMPUR: The ringgit reached a low of 4.7900 against the US dollar at noon today, as jittery investors rushed to accumulate the safe haven currency amid heightened geopolitical tensions.
The local note has depreciated almost 0.9 per cent against the US dollar in the last week.
Bank Muamalat Malaysia Bhd chief economist and social finance head Dr Mohd Afzanizam Abdul Rashid speaking to Business Times, explained that during periods of economic uncertainty, the US dollar typically acts as a safe haven currency, prompting forex traders to allocate more of their holdings to it.
"Also, the US Fed is not in a hurry to reduce their benchmark interest rate given a series of economic data that supports the view that their economy is still robust."The latest numbers that we saw was the Retail Sales which grew by 0.7 per cent month-on-month which was higher than consensus estimates of 0.4 per cent," he added.
Afzanizam explained that there is always a possibility for the ringgit to hit 4,8 to the US dollar as the value of the currency is market driven.
"Hence, the heightened uncertainties would cause the ringgit to overshoot but as the situation would improve at some point, ringgit would be experiencing a reversal in trend. That is the nature of the currency market," he said.
Afzanizam said so far the ringgit's weakness is only limited to the US dollar, with it holding up well, even appreciating, against the other currencies such as as sterling, euro, Singapore dollar and Thai Baht.