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Concern Rises As Ringgit Heads Toward Worrying Level

KUALA LUMPUR: The ringgit may again reach its lowest valuation point as it nears the 4.80 level again against the strengthening US dollar (USD).

US inflation data, rising US treasury yields, and escalating Israel-Iran tensions in the Middle East have thrown a spanner in the ringgit’s steady recovery against USD over the past month, following policy measures by Bank Negara Malaysia (BNM).

The ringgit opened lower against the USD yesterday for the second consecutive day, falling to 4.7885 from Monday’s closing of 4.7785, which weakened even further to 4.7945 by 6pm.

The ringgit touched RM4.80 against the greenback in February, which is its weakest level since January 1998 during the height of the Asian financial crisis.

Bank Muamalat Malaysia Bhd chief economist Afzanizam Rashid said US data continued to point towards robust economic growth with retail sales in March, rising more than expected to 0.7% month-on-month (MoM) and beating the consensus forecast of 0.4%.

“Consequently, the futures market has assigned a lower probability for rate cuts, suggesting the monetary easing thesis this year has diminished and lending more support to USD.

“We have a heightened geopolitical risk which resulted in forex players flocking to the US dollar, and we have the US Federal Reserve (Fed) which is likely to keep the rate higher for longer,” he told Bernama.

He also said the Fed seemed unlikely to cut the interest rate in the near- term considering the stubbornly high inflation rate recorded in March at 3.5%.

Meanwhile, on Monday, BNM issued a statement reaffirming it will ensure that Malaysian financial markets remain orderly and continue to function efficiently in light of the geopolitical situation in the Middle East.

The central bank said it would also ensure sufficient liquidity and the orderly functioning of the foreign exchange (FX) market, supported by ongoing initiatives with government-linked companies (GLCs), government-linked investment companies (GLICs), corporations and exporters bringing more inflow and liquidity into the forex market.

Earlier this month, BNM’s Financial Markets Committee (FMC) said it was encouraged by the central bank’s “enhanced efforts” to further promote FX conversion activities by government-linked entities, Malaysian corporates and businesses.

It noted that between Feb 26 and April 5, the ringgit was the only regional currency that strengthened against USD, gaining 0.6%.

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