By Sherilyn Goh
The ringgit is likely to remain weak on the back of ongoing uncertainties and the anticipation of a higher interest rate in the United States, noted AmResearch following Bank Negara Malaysia’s (BNM) announcement last week, which saw its international reserves declining by 8.3% month-on-month (m-o-m) at end-July to come in at US$96.7 billion (RM364.7 billion).
According to AmResearch, the sharp deterioration in reserves due to a weaker-than-expected ringgit seen in the first half of 2015 (1H15) is likely to persist, with BNM expected to mediate in the forex market to ensure an orderly fluctuation of the currency.
Despite the 10.1% year-on-year (y-o-y) improvement in net trades during the second quarter of 2015 (2Q15), it is observed that cumulative trade balance had fallen by 7% year-to-date (YTD) as at end-June 2015.
The first week of August has seen the ringgit deteriorating by another 2.6% from end-July, and is weaker against its regional counterparts on a YTD basis.
This is while the US dollar continues to gain momentum in relation to regional currencies, which saw the dollar index closing at 1,212.07 points on Friday. On a YTD basis, the ringgit traded at an average of 3.67 per US dollar, as compared to 2014 when the ringgit traded at an average of 3.27 against the greenback and ended the year at 3.50 per US dollar.
Key indicators including a recent report on the US services sector have also reinforced the likelihood of an anticipated September rate hike by the Federal Reserve, after holding its target for the Fed funds rate at virtually zero since December 2008. US unemployment rate has also remained unchanged at 5.3% in July, close to Fed’s long-term target of a 5.0%-5.2% range.
At midday, the current conversion rate stood at RM3.93 to the US dollar.
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