KUALA LUMPUR (June 23): The ringgit continued its downtrend, declining to 2.8021 against the Singapore dollar and 3.7533 versus the US dollar.

Yesterday, the Singapore dollar hit a new all-time high against the ringgit, closing at RM2.8005.

A chief economist from a local bank-backed research house said that the downtrend of the ringgit is largely due to low crude oil prices, which serves as one of the nation’s main sources of revenue.

“The ringgit weakens because of the perception that some 30% of the country’s revenue is coming from oil, although the government later denied that during the revised budget,” the economist told theedgemarkets.com over the telephone today.

The economist added that as Singapore is a service-oriented economy, its currency is not heavily affected.

“For Malaysia, it is more commodities based, which contributed to the downturn of the ringgit, whereas Singapore does not have commodities there,” he said.

However, the economist added that the ringgit is not the only currency in the region on the downtrend.

“If you look at the current regional currency performances, most of the commodities-based economies have been heavily affected during the last eight to ten months.

“The worst performance in the region is Australia. Since last September, their decline is about 16%. And then next is the Malaysian ringgit, which is 15%. The euro and yen is also around there. So we are not alone,” he said.

Moving forward, said the economist, for the ringgit to improve, political instability has to be removed.

“An area of improvement that will boost the sentiment of the ringgit is the removal of all these uncertainties. Politically also, with the distorted Pakatan, and with Barisan Nasional fighting amongst each other, it affects the ringgit. How are you going to attract foreign funds with all this going on?

“Barring that, our expectation is 3.60 versus the US dollar by the end of the year,” he said.