Ringgit Slumps; Asian Currencies Hit As Trump Win Spurs US Rate-Hike Bets

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As at 1.20pm Friday, the bid rate for the regional onshore rate was 4.2700 and ask was 4.2800. The non-deliverable forwards bid rate was at 4.3485 and ask was 4.3500.
As at 1.20pm Friday, the bid rate for the regional onshore rate was 4.2700 and ask was 4.2800. The non-deliverable forwards bid rate was at 4.3485 and ask was 4.3500.

KUALA LUMPUR: The ringgit fell to a low of 4.3700 on Friday, the weakest since Jan 22, 2016 in volatile trade but Bank Negara Malaysia stated that the country will not peg the currency.

Muhammad Ibrahim
Muhammad Ibrahim

Governor Datuk Muhammad Ibrahim said it would not peg the ringgit despite the recent volatility which the currency has been facing due to external environment.

“(The) ringgit will continue to face volatility mainly due to uncertainties in the external environment. The value of the ringgit should not be determined by speculative position,” he was quoted by the Star online news portal.

The US dollar-ringgit exchange rate so far today was between 4.2952 and 4.3700, Bloomberg data showed. The US Dollar Index, which measures the value of the US dolllar against a basket of currencies, rose to between 98.802 and 98.914.

Other Asian currencies also weakened against the US dollar. At the time of writing, the Singapore dollar depreciated to 1.4139 while the Thai baht’s exchange rate was at 35.34.

At a press conference on the third quarter GDP data, he was asked about the ringgit curbs. “Normally, we don’t’ actually reveal the specifics. We normally deal with individual banks but if there are any policy changes, we will announce it.”

On the ringgit, he said traders should not take the spot rate from the non-deliverable forward rate.

At 1.20pm, the bid rate for the regional onshore rate was 4.2700 and ask was 4.2800. The non-deliverable forwards (NDF) bid rate was at 4.3485 and ask was 4.3500.

The ringgit was quoted at 4.3492 to the greenback from 4.2802 the previous day and was at 5.4649 against the pound sterling from 5.3011 on Thursday.

credit

Credit Suisse analysts wrote in a note: “Our US teams have earlier argued that a Trump presidency would result in expansionary fiscal policy, implying greater inflation and supply pressure for US yields to prove higher than otherwise.

“However, it will be at least a quarter or two for this expected fiscal stimulus to happen. This leads us to break our thinking about the macro outlook for Asia into phases.

“The first phase, the next few months, is likely to be a period of increased market and business uncertainty about policy that may weaken investment and growth in the region.”

The ringgit was pegged at 3.80 to the US dollar in 1998 during the Asian Financial crisis and lifted in 2005.

Earlier on Friday, the ringgit depreciated against most major and regional currencies, tracking the weaker regional currencies including Indonesia’s rupiah.

Donald Trump
Donald Trump

The MYR would likely suffer if President Trump liberalises the regulatory environment for US oil and gas, increasing production and depressing global oil prices,” Credit Suisse said.

Muhammad said the volatility was a reflection of the shift in investor sentiments and the rebalancing activity of portfolio investors throughout the quarter, driven mainly by external events.

“While all regional currencies were affected by the continued uncertainty over the timing of US interest rate normalisation, the ringgit and the currencies of other commodity-exporting countries were faced with additional adjustments due to the highly volatile global crude oil prices during the quarter,” he said.

Earlier on Friday, Indonesia’s rupiah plunged the most in five years, prompting the nation’s central bank to say it stepped in to stabilize the market, Bloomberg reported.

The rupiah sank 2.7 percent to 13,495 per dollar as of 9:47 a.m. in Jakarta, set for the biggest decline since September 2011, according to prices from local banks compiled by Bloomberg. It dropped as much as 3 percent to reach a five-month low of 13,545.

reuters

Meanwhile, Asian shares stumbled on Friday and emerging market currencies skidded as investors feared higher interest rates under incoming President Donald Trump will spark capital outflows from the region.

Reuters reported MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.4 percent as US bond yields continued to soar on views that Trump’s spending plans will push up inflation, possibly triggering more aggressive rate hikes by the Federal Reserve.

Emerging markets bore the brunt of selling, with Indonesian shares slumping 3 percent while the rupiah currency fell more than 2.5 percent to 4-1/2-month lows.

The Mexico peso, sank to near its record low hit after Trump’s surprise sweep to power.