KUALA LUMPUR (Oct 25): The ringgit on Tuesday morning (Oct 25) depreciated to its weakest level against the Singapore dollar at 3.3386.

At 10am, the local note had pared losses at 3.3353 against the Singapore dollar.

Additionally, the US dollar strengthened against the ringgit to a fresh high of 4.7417, surpassing both its opening and previous close of 4.7380.

In a note on Tuesday, MIDF Research said the ringgit movement was driven more by expectations of a hawkish US Federal Reserve (Fed), rather than the increase in crude oil prices. Brent crude prices were up 2% last week to US$93.50 per barrel, from US$91.63 per barrel. 

The research firm also attributed continued weakening of the ringgit against the greenback to the 15th general election next month.

MIDF Research also noted that the US dollar weakened last week, with the US dollar index closing at 112.01 last Friday, lower by 1.1% from the week before.

“Although the lower demand for US dollars reflected improved risk appetite among investors and speculations about the Fed’s pivot, it was also dragged down by renewed recession fears, as the Fed is expected to carry out another large rate hike in the upcoming Federal Open Market Committee meeting,” it said.

Kenanga Research in a note on Tuesday concurred, saying that despite Malaysia's better-than-expected external trade reading, the ringgit depreciated by more than 0.7% in a week against the US dollar, primarily due to a sharp spike in the 10-year US Treasury yield amid a hawkish Fed narrative. 

It said the narrowing of the Malaysia-US yield premium, coupled with domestic political uncertainty and weakening of the yuan, had further pressured the ringgit to trade near its all-time low of 4.77 against the greenback.

“Negative sentiment surrounding the domestic political situation and persistent US dollar strength may continue to pressure the ringgit to trade around the 4.73 to 4.75 zone against the greenback. 

“The US dollar index is expected to hold ground, and continue to trade around the 112.0-114.0 levels, due to expectations that the US' third-quarter gross domestic product may record a decent growth. 

“However, a more hawkish European Central Bank and a surprise move by the Bank of Japan may provide a temporary reprieve for the ringgit,” wrote Kenanga. 

Against other major currencies, the ringgit depreciated to 4.6863 against the euro, and weakened to 2.9964 against the Australian dollar.