Thursday 28 Mar 2024
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KUALA LUMPUR (Aug 14): The ringgit weakened to a new level against the US and Singapore dollar today after crude oil prices fell below US$42 (RM171) a barrel in overnight trades.

Today, the ringgit depreciated to a fresh level against the US dollar at 4.1270 and 2.9346 versus the Singapore dollar. Earlier, the ringgit opened at 4.0201 and 2.8697 against the US dollar and Singapore currency respectively.

The ringgit's strength correlates with crude oil prices as the commodity forms a crucial component of the Malaysian economy.

Reuters reported that US crude oil prices remained close to their lowest in over six years early on Friday, as rising US stockpiles stoked oversupply and on worries over demand from slowing economies in Asia.

US oil prices tumbled more than 3% to a 6½-year low under US$42 a barrel on Thursday as data showing a big rise in key US stockpiles intensified concerns over a growing global glut.

In Malaysia, AmBank (M) Bhd wrote in a note it remained unclear how far the ringgit would likely depreciate against the US dollar given Malaysia's plunging external reserves, looming US interest rate hikes, ongoing decline in crude oil prices and the devaluation of China's currency.

AmBank argued that the ringgit was not fundamentally flawed but suffering from bad sentiment.

"Concerns are resurfacing if Bank Negara may reintroduce currency peg to curb speculative pressure.

"Our macro and market analysis detects no major stress signs to suggest for ringgit peg possibility. Compared to the 1997 and 1998 Asian financial crisis, the depletion of foreign exchange reserves is more severe this time but we take comfort from stability in industrial production and M1 (money supply) growth," AmBank said.

 

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