KUALA LUMPUR: The ringgit will likely extend its downward momentum against the US dollar next week as the weaker external environment amid heightened concerns over the Covid-19 outbreak will curb investors risk appetite, dealers said.
A dealer said the ringgit would likely move in a tight range of between 4.1650 and 4.1850, and the downside to below 4.20 is not seen for now due to the latest Bank Negara Malaysia’s (BNM) overnight policy rate (OPR) cut, which has boosted the demand for the ringgit.
She believed the negative environment in the global market, coupled with lower oil price, was much stronger compared with the local situation, hence, the local currency would continue to retreat after a short uptrend in mid-week.
“Economic numbers are down due to mounting COVID-19 fears, oil is down 2.7 per cent overnight on Friday to below US$50 per barrel level, which would affect Malaysia’s deficit target in the long run.
“With the United States and European Union both cutting their key interest rates, this clearly indicates a global economic slowdown in 2020,” she told Bernama.
For the week just ended, the ringgit ended sharply higher against the US dollar at 4.1700/1750 compared with 4.2120/2180 recorded on Friday in the previous week.
The movement was influenced by the reduction in the OPR by BNM and the key interest rate by the US Federal Reserve, falling oil prices on potential production cut by the producing nations, as well as mounting fears over Covid-19.
BNM on Tuesday slashed its benchmark rate by 25 basis points (bps) to 2.50 per cent to provide a more accommodative monetary environment to support the projected improvement in economic growth amid price stability.
This was the second rate cut after the central bank surprisingly cut the benchmark rate by 25 bps during its first meeting for this year on Jan 22.
On a Friday-to-Friday basis, the local currency depreciated broadly against a basket of currencies.
It declined against the Singapore dollar to 3.0222/0267 against 3.0215/0269 a week earlier, contracted sharply versus the Japanese yen to 3.9643/9701 from 3.8749/8815, and fell against the euro to 4.7088/7161 against 4.6517/6588 last week.
The local note, however, rose vis-a-vis the British pound to 5.4156/4237 from 5.4343/4438 previously. – Bernama