Ringgit a ecte by sterling s il s ings
HE s terling was on a rollercoaster ride yesterday as it plunged against the US dollar to its lowest level since 1985 as the UK voted to quit the European Union (EU).
The results from the referendum showed that 51.89% of total voters chose to leave the EU while 48.11% decided to stay.
The nations’ decision to leave the EU not only had a negative impact on the sterling and the FTSE 100, but also on emerging markets as their currencies went on a wild ride.
While the ringgit was strengthening against the sterling during intraday trade, it was hurting from the US dollar rallies.
“The weakening in the ringgit was in line with the other emerging market currencies as investors are liquidating their position in emerging market assets.
“But the ringgit depreciation against the US dollar was milder due to Bank Negara’s intervention in the foreign exchange market to keep the ringgit steady at the 4.12 region,” says independent forex strategist Suresh Ramanathan.
He adds that the emerging market could be facing an outflow of capital as investors rush to put their money in “safe havens” assets such the US treasuries, gold and yen.
“The volatility of the ringgit against the US dollar would continue in the next few months and ringgit could depreciate further if the effect from the Brexit decision worsen,” he says.
MIDF Research says in report that inves- tors will typically re-optimise their risk exposure by shifting their portfolio from risky asset classes like equities and corporate bonds to safe havens.
“Among the safe asset classes favoured by investors are bullions like gold, currencies like the yen and US dollar, and government bonds with high sovereign credit ratings like the US treasury bills and German bunds,” it says. It has revised its forecast on the ringgit to RM4.10 a US dollar.
On the brighter side, the ringgit is strengthening against the sterling, which is positive news for parents with children studying in the UK.
The ringgit rose as high as 8% against the sterling yesterday, before ending the day with RM5.69 per sterling.
“The improvement in the sterling to the ringgit rate after the votes result to leave EU was because the ringgit is weakening as investors are rushing to withdrawing their money and pumping them into US treasury, US dollar and yen,” says an analyst.
Despite the lower exchange rate between the sterling and ringgit, several money changers are not willing to sell their sterling stock any lower than RM5.90 to customers.
“For today, a lot of of money changers are not willing to sell their sterling stocks at the RM5.60-RM5.70 rate. The spread between buying and selling is 40-50 sen throughout the day,” says a money changer in Petaling Jaya.
“So basically, customers would not be able to enjoy the current rates in the next few days. But in banks, the rate could be different,” he adds.