Ringgit hits maximum value projected by experts
Najib Aroff
Ogos 7, 2015 14:52 MYT
Ogos 7, 2015 14:52 MYT
Sentiment towards currencies of developing nations is affected following the projected rise in US interest rates in September.- File photo
The ringgit has slipped RM3.90 against the US dollar on Thursday, which considered to be the lowest in 17 years.
It is also the maximum value targeted by analysts and economists on Tuesday who predicted the ringgit to be around RM3.80 and RM3.90 against the US dollar until the end of this year.
Sentiment towards currencies of developing nations is affected, following the projected rise in US interest rates in September.
The ringgit fell to that level during the Asian financial crisis in 1997 and 1998 before it was pegged at RM3.80 to the US dollar at the time.
Bank Negara was seen directly intervening in currency markets to support the ringgit, thus raising concerns over the decline in foreign exchange reserves.
Managing Director of the Institute of Economic Research (MIER) Professor Dr Zakariah Abdul Rashid said the central bank’s intervention puts the country's ratings at risk.
This is because foreign exchange reserves fell to US$100.5 billion as of July 15, 2015 compared to US$140 billion in the first quarter of 2013.
RAM Ratings economist Kristina Fong, however, said the ringgit will not hit the RM4 value against the US dollar since the depreciation is driven by sentiments and the Malaysian economy foundation is still strong.
Malaysian Rating Corp Bhd chief economist Nor Zahidi Alias said the price of crude oil fell to US$50 per barrel - fuelling speculations about lower government revenue.
He said it gives the impression that fiscal deficit is difficult to control.
Besides that, he said the weak ringgit puts pressure on Malaysia's external trade which recorded a negative growth in the first five month of this year.
"Malaysia's gross domestic product (GDP) for 2015 may also be affected if oil prices remain low throughout the year," he said.
For China, Zahidi said the weak economic position affects demand and leads to a decline in exports to China.