KUALA LUMPUR (Oct 3): Malaysia's daily foreign exchange (FX) turnover climbed to its highest on record since 2017 at US$22.42 billion (RM104.19 billion) on Friday (Sept 30), the final trading day of the third quarter (3Q22), from US$17.74 billion on Thursday (Sept 29), according to Bank Negara Malaysia's (BNM) latest update.
This was as FX markets took their cue from higher US interest rate prospects to fight inflation, and as investors evaluated the possibility of an escalation of the Russia-Ukraine war.
Prior to Friday, Malaysia's highest daily FX turnover was at US$22.16 billion on Sept 21, 2022, according to the central bank.
Meanwhile, the lowest daily FX turnover on record was at US$4.9 billion on Oct 9, 2017.
Global inflation, interest rate hike and Russia-Ukraine war sentiments had led to a depreciation in world currencies including the ringgit against a strengthening US dollar, which saw higher demand from investors seeking higher returns from US interest rate hikes and as they sought safety in the US dollar, which is deemed as a haven in times of geopolitical uncertainties.
At the time of writing on Monday (Oct 3), the ringgit weakened to 4.6497 against the US dollar. The exchange rate so far on Monday was between 4.6375 and 4.6500.
Over the last one year, the exchange rate was between 4.1392 and 4.6500.
Global interest rate hikes to tame acccelarating inflation had hit world markets.
It was reported that US and global stocks slumped further on Friday, with government bond yields and the US dollar holding near recent peaks, as higher-than-expected inflation capped a nasty third quarter for world markets.
All three major Wall Street indexes in the US finished down around 1.5%, after a day of choppy trading.
"Asian shares outside of Japan fell 0.4% on Friday, down around 13% in September, their largest monthly loss since the start of the pandemic in 2020," Reuters reported.
Malaysia's FBM KLCI has fallen below 1,400 points to levels not seen in more than two years, as investors weighed the spectre of slower global economic growth due to world central banks' move to raise interest rates to fight inflation, according to analysts.
"Following the recent steep three-week correction on the KLCI to below 1,400 to re-test levels not seen in more than two years, technical momentum has turned excessively oversold, hence increasing chances for rebound upside this week," TA Securities Holdings Bhd analysts wrote in a note on Monday.
"Market volatility should remain elevated, with key chart supports likely to be tested and hopefully stall this correction leg. Buying momentum should stay lackluster, pending any positive domestic catalysts to reverse the slide.
"On the other hand, externally, with US stocks tumbling to fresh lows for the year, sparked by worries surging interest rates, inflation and currency volatility will trigger a global economic recession and a hard landing, the bearish sentiment should continue to spillover and stall recovery attempts," TA said.
MIDF Amanah Investment Bank Bhd's research team wrote in a note on Monday that last week saw another round of sell-off, with the US dollar holding near recent peaks, on top of historically high inflation, rising interest rates and growing recession fears.
"It marked the third weekly decline for the S&P 500 and Dow Jones (Industrial Average), and all three main (US equity) indices were down for the second consecutive month," MIDF said.
Meanwhile, Bursa Malaysia-listed companies' shares had last week continued to see net selling by foreigners for the fourth consecutive week, MIDF said.
"They (foreigners) have net sold -RM740.6m worth of equities last week, which was higher than the RM562.6m sold in the previous week," MIDF said.