Ringgit likely to extend downtrend

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

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

The ringgit hit another new 24-year low last 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 had also weighed on the local currency.

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

Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz had said a flexible ringgit exchange rate was 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, would ensure stable and smooth financial market conditions and take proactive measures to provide adequate liquidity and resilient markets to maintain the stability of the ringgit. It would continue to closely monitor and ensure orderly financial market conditions.