USD/MYR on the verge of falling back to 4.0

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KUALA LUMPUR (May 25): The ringgit has been on a downtrend along with the rest of the emerging market currencies amid a stronger US dollar, rising US treasury yields, Turkey’s lira crisis, as well as a cautious stance taken by investors and traders while waiting for more policy direction from the new Malaysian government.  

The decline of the ringgit coincided with the change in government, after Tun Dr Mahathir Mohamad led Pakatan Harapan to a historic victory in the 14th general election which saw Barisan Nasional lose its grip on power for the first time since independence from the British colonial rulers.

Prior to the elections, the ringgit was the second best performing currency (year-to-May 8) behind the Colombian peso, but since then, it has fallen by 0.81%. At the time of writing, the ringgit was trading at 3.9818 against the US dollar.

Jameel Ahmad, global head of currency strategy & market research at FXTM, pointed out that the ringgit is likely to be dictated by external events in the coming weeks, as there is very low volume of economic data scheduled for Malaysia next week.

“I would personally keep a close eye on how investors would behave towards the dollar, as the ongoing resurgence in the greenback has pressured emerging market currencies over the past couple of weeks, while breaking news that the United States-North Korean summit will not be going ahead, also has the potential to impact the local currency,” Jameel Ahmad said.

Buying demand for emerging market assets such as ringgit would be lesser if investors’ risk appetite is reduced, following the latest development, he added.