KUALA LUMPUR (Aug 11): The ringgit fell to a new record low of 3.2517 against the Singapore dollar on Thursday (Aug 11), before trimming its losses to 3.2473 as of 6pm.

The local currency, which has depreciated 5.13% year-to-date (YTD) from 3.0887, traded at 3.2353 a day earlier.

The ringgit, meanwhile, strengthened against the US dollar at 4.4453 at of the time of writing on Thursday.

The ringgit remains undervalued based on the real effective exchange rate (REER) model, according to MIDF Research in its thematic report dated Aug 9. "The value of ringgit at REER even fell further in 1HCY22 (first half of calendar year 2022)".

The REER is an indicator of a country's international competitiveness relative to its trading partners. It compares the value of a country's currency with the weighted average of the currencies of its major trading partners.

"Ringgit's performance against regional currencies is rather mixed: weakened against Singapore dollar (4.2%), Indonesian rupiah (2.6%), and Chinese yuan (0.7%)," said MIDF.

However, looking at improving growth momentum, elevated commodity prices, and increasing domestic economic activities on the back of economic reopening, the research house believes the economic fundamentals are more in favour of the stronger ringgit. 

"In addition, possible reversal of financial flows towards EM (emerging markets) and improved appetite for risk assets will be positive for regional currencies, including ringgit. Moreover, EM currencies stand to gain from improved growth outlook in China in the latter part of the year, after being negatively impacted by the Covid-19 lockdowns reimposed in 2QCY22 (second quarter of calendar year 2022).

"Considering the improved growth outlook and sustained current account surplus, we forecast ringgit could appreciate and reach RM4.25 by end-2022," it added.