Global economic tensions to weigh on ringgit next week

KUALA LUMPUR: The ringgit’s movement next week is expected to remain on a downtrend, in line with most Asian currencies, due to emerging tensions in the global economy, including Brexit.

FXTM Global Head of Currency Strategy and Market Research Jameel Ahmad said the return of global market uncertainty over Brexit as a dominant theme represents a risk, weighing on demand for emerging markets next week.

“It appears that neither traders nor the UK Parliament are convinced that the current terms secured by UK Prime Minister Theresa May with the European Union for Brexit are going to be easy to push through, which highlights the need for traders to be monitoring these themes up until the long-anticipated EU summit on Nov 25, 2018,” he told Bernama.

He said emerging markets across Asia might not be as exposed to Brexit- associated risks as those more closely situated to the United Kingdom and Europe, but it is something that can make investors less attracted towards investing in riskier assets, which is how emerging markets can be negatively impacted.

“It will be interesting to see whether political uncertainty in Europe encourages investors to take the dollar for another run higher up in valuation, which would bring another return of the dollar divergence story that has pressured emerging markets across the globe throughout large parts of this year,” he added.

He said the prospect of a stronger greenback also presents the highest risk to the ringgit falling to 4.20 before the year is over.

“It could happen sooner than this, but everything is dollar-dependent right now in the marketplace and there isn’t a domestic catalyst that can inspire fluctuations for the local currency,” he said.

For the week just ended, the ringgit was rangebound versus the greenback during the week.

The local unit was traded mostly lower, as investors shifted towards the safe haven currencies due to the US Federal Reserve’s reaffirmation of its hawkish monetary policy stance later this year.

On a Friday-to-Friday basis, the local note weakened to 4.1900/1940 against the US dollar from 4.1780/1810 in the previous week.

However, against a basket of major currencies, the local note was traded mostly higher.

The ringgit depreciated against the Singapore dollar to 3.0428/0462 from 3.0315/0341 and vis-a-vis the Japanese yen, it declined to 3.6946/6991 from 3.6685/6714.

The local currency strengthened against the British pound to 5.3603/3671 from 5.4343/4386 but weakened against the euro to 4.7506/7568 from 4.7362/7413. — Bernama

Source: TheSunDaily