Zhitong Finance APP learned that as oil prices decline, the Malaysian ringgit (Malaysian currency) is facing support tests for the 2017 low and may further fall to levels during the Asian financial crisis.
ringgit has been steadily falling since the first quarter, even as Malaysia commodity export prices have been rising most of the year. Ringgit now looks more fragile as crude oil and palm oil prices have fallen sharply from their 2022 highs in recent months.
Last Friday, the ringgit exchange rate against the US dollar hit 4.4810 ringgit against the US dollar, the lowest level since January 2017. Qi Gao, a foreign exchange strategist at Scotiabank, said the ringgit could fall with the decline if crude oil prices fall further in the coming weeks or risk sentiment worsens.
At the same time, as Feder significantly tightens monetary policy, Malaysia is easily affected by capital outflows. As of August 18, the total amount of funds flowing into the Malaysian stock market this year has reached US$1.82 billion. However, we cannot take it for granted that this will continue. "The more likely determinant of the Ringgit against the US dollar's trend is portfolio capital flows rather than trade," said Galvin Chia, emerging market strategist at NatWest markets. He said another round of widespread risk aversion and a large amount of portfolio capital outflows could push the US dollar against the Ringgit exchange rate to 4.50. Once the 4.5002 point is broken, the ringgit will further fall to the low in January 1998.
The central bank of Malaysia has raised the benchmark interest rate twice this year, 25 basis points each time. The central bank also has the possibility of further hiking rate hikes, but pales in comparison with the Fed. The Fed has raised key interest rates by 225 basis points this year and will continue to raise interest rates.
The dollar may be boosted by tough stances among Fed officials in the coming week. If Ringgit wants to strengthen, it may require Malaysia's inflation data released on August 26 to be far higher than expected.
