Ringgit may ease further if US-China spat escalates
External factors, including US-China trade tensions, will weigh on performance, says FXTM
THE ringgit may weaken to as low as 4.10 versus the US dollar by yearend if trade tensions between the United States and China escalate.
FXTM global head of currency strategy and market research Jameel Ahmad said trade tensions were the biggest risk that the financial markets had come across since the 2008 global financial crisis.
He said the ringgit’s less- thanstellar performance was on the back of multiple external factors which included stronger US dollar and trade tensions between the US and Canada, Mexico and the European Union.
“Investors remained interested in the dollar with the higher interest rates in the US, on the back of trade war tensions.
“The ringgit depreciation was mainly because of this while the country’s ballooning debt and policy changes only contributed a small percentage to that,” Jameel said at a briefing, here, yesterday.
He believes if the retaliation to trade tariffs by China was not too significant or if the trade war concerns were played down, some of the risk appetite could return to the emerging markets, which could be positive for the ringgit.
He said it was difficult to predict the local currency’s fair value, although he agreed with Prime Minister Tun Dr Mahathir Mohamad’s remark that its fair value could be at 3.80 on an economic level.
“The ringgit had failed to keep its upward momentum this year and we believe that external factors would still have a big impact on the currency.”
However, Jameel said the ringgit remained the second best performing currency in Asia, after the yen.
The ringgit closed higher against the dollar yesterday, in line with other emerging market currencies and supported by strengthening crude oil prices, according to Bernama.
At 6pm, the local currency ended at 4.0200/0250 against the greenback from Monday’s 4.0250/0300.
Jameel, meanwhile, is confident that the appointment of Datuk Nor Shamsiah Mohd Yunus as the new Bank Negara Malaysia governor would be good for the economy.
He expects the Malaysian economy to grow at least five per cent this year.
The zero-rating of the Goods and Services Tax had a positive impact on retail sentiment, he said.
“Any new policies or tax regime that the government will introduce after this will take at least four to six months to show some results,” added Jameel.