The ringgit slipped further against the US dollar this morning, extending last week’s downtrend, as the first-ever hung parliament outcome in Malaysia from the 15th General Election (GE15) held last Saturday shook investor confidence, an analyst said.
At 9am, the local note slid 290 basis points (bps) to 4.5780/5880 against the US dollar from Thursday’s close of 4.5490/5565.
The market was closed last Friday to enable voters to cast vote in GE15.
However, SPI Asset Management managing director Stephen Innes reckons that the market would take the general election results in stride given that the hung government was expected.
“So, expect more political horse-trading and compromise in such a setting, which could provide checks and balances, with the focus on the formation of the next government.
“However, from the market’s perspective, the GE15 results may fail to ease concerns over the recent phase of political instability, which had been hanging as a dark cloud over Malaysian capital markets,” he told Bernama.
GE15, the most intense general election the country had ever faced, has ended in a hung parliament with no party securing a clear majority to form a new federal government.
Innes noted that investors have been shrugging off the hawkish US Federal Reserve interest rate hike decisions and peering down the China reopening-looking lens, which should be favourable for local capital markets.
“Also, any weakness in the US Dollar Index (DXY) should encourage exporters to pare down their accumulated US dollar holdings and be a driver of the ringgit’s strength,” he added.
Ambank Research said that the focus of the week would be on the US Federal Open Market Committee (FOMC) minutes that should provide a clearer picture of the interest rates outlook.
“Therefore, we expect the ringgit to trade between our support level of 4.550 and 4.560 while resistance is pinned at 4.600 and 4.610,” it said.
Meanwhile, the ringgit traded lower against a basket of major currencies.
It fell versus the Singapore dollar to 3.3280/3358 from 3.3091/3150 at Thursday’s close, depreciated against the euro to 4.7222/7325 from 4.7146/7224, eased vis-a-vis the Japanese yen to 3.2628/2701 from 3.2581/2637 and down versus the British pound to 5.4323/4441 from 5.4069/4159 previously.
US Dollar Edges Higher
The US dollar started the week on the front foot, boosted by defensive buying as investors remained on edge following a spike in Covid-19 cases in some cities in China that prompted officials to tighten restrictions.
China’s capital Beijing reported two Covid-19 deaths for November 20, with the city’s most populous district urging residents to stay at home today, extending a request from the weekend.
The rising cases have cast doubt on the hopes of an early easing in strict pandemic restrictions.
“The outlook for China’s zero-Covid market will remain a key source of volatility,” said Carol Kong, a currency strategist at Commonwealth Bank of Australia.
“If we do see another set of step up in restrictions, it indicates to me that the Chinese officials are still wary of any eventual reopening.”
The dollar index rose 0.131 per cent to 107.030 today, after logging its biggest weekly gain in a month last week, while the offshore Chinese yuan rate was at US$7.1700 per dollar, Reuters cited.
Hawkish comments from the Federal Reserve officials have helped the safe-haven dollar stabilise after its sharp dive earlier in November.
Investors will be keenly interested in the minutes from the Fed’s November meeting due to be released on Wednesday that could shed light on how high officials ultimately expect to raise interest rates.
Meanwhile, cryptocurrencies remained under pressure, with bitcoin down 0.3 per cent to US$16,205.00, while Ether also shed 0.3 per cent. FTX owes its 50 biggest creditors nearly US$3.1 billion, according to bankruptcy filings, as the collapsed crypto exchange undertakes a strategic review of its global assets.
The euro fell 0.21 per cent to US$1.0302, while sterling was last traded at US$1.1851, down 0.30 per cent on the day.
The Japanese yen weakened 0.04 per cent versus the greenback at 140.42 per dollar. The Australian dollar fell 0.25 per cent versus the greenback at US$0.665, while the kiwi was down 0.21 per cent at US$0.614.
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