KUALA LUMPUR: The ringgit sank to a seven-month low against the US dollar yesterday following the United States Federal Reserve’s decision last week to end asset purchases as part of its stimulus programme.
The ringgit, which opened trading at RM3.3095 yesterday, ended the day at RM3.3180.
According to Bloomberg, the ringgit retreated 0.91 per cent, which marks the currency’s biggest decline since September 15.
The greenback, however, tracked gains to a record four-year high of 87.400 versus major currencies, continuing its growth path since last week’s policy statement from the US central bank.
Its momentum was also boosted by Bank of Japan’s surprise stimulus announcement last week, which dragged the yen down to a seven-year low.
AmMarkets forex strategist Wong Chee Seng expects the ringgit to continue experiencing a certain degree of depreciation pressure.
“Compared with other regional currencies, however, positive contributions such as improving fiscal balance, resilient exports, trade surpluses and robust economic growth will help to separate it from peers,” he said.
The ringgit appreciated 6.5 per cent between February and August, during which it fell from a high of RM3.3460 to a low of RM3.1410 against the US dollar.
Wong attributed the volatility of the ringgit during the seven months to a few factors.
Malaysia, he pointed out, was the only Asian country to hike its interest rate before the Fed and, along with China and the Philippines, the only East Asian countries to boast an economic growth rate of more than six per cent in the first half of the year.
“The fortunes started to reverse in September when the ringgit depreciated by 3.80 per cent against the US dollar — the third worst performing currency after the won and rupiah.”
With the absence of data clues in Asia, positioning was the sole underlying driver for Asian currencies.
“Southeast Asian currencies suffered heavy losses against US dollar compared with their Northeast peers amid foreign funds’ continued equities sell-off and rising US yields.
“The ringgit led with a 0.37 per cent drop against the US dollar, followed by the baht (0.33 per cent) and rupiah (0.30 per cent), respectively.”
The key focus will be on Bank Negara Malaysia’s meeting on Thursday, where policy rate is expected to be left unchanged at 3.25 per cent.