The ringgit is expected to face a challenging upcoming week as the market uncertainty over trade tensions and a slowdown in the global economy encourage investors to remain risk-off. FXTM Research Global Head of Currency Strategy Jameel Ahmad said that the local unit may face the risk of falling below RM4.15 against the greenback next week.
“The local currency has actually performed reasonably well this week during a period of heightened market uncertainty due to concerns over a global economic slowdown in 2019, and I actually would have expected the currency to fall lower due to investor reluctance to invest in emerging markets when there is significant market uncertainty,” he said.
He said the ringgit and its emerging market peers across the globe face significant downside risks heading into the next trading week, as global financial markets continue to be gripped by market turmoil.
“The first few days of the new trading year have not been kind to financial markets, with a number of global stocks selling off and a “flash crash” in the currency markets leading to losses in a number of currencies including the British pound, Australian dollar and Turkish lira while the Japanese yen surged across the board,” he added.
Although the ringgit and its Asian peers got away from the flash crash in the market unscathed, he said the prolonged risk-off environment that is hurting risk appetite is encouraging expectations that emerging markets are at risk to another round of selling off.
“I would keep a close eye on whether the ringgit falls below 4.15 next week, because this will raise market expectations that the currency of Malaysia will gradually return to the 4.20 levels over the coming weeks,” he said.
For the week just ended, the ringgit closed mostly lower against the US dollar with market sentiment moved by global economic uncertainties and weak Purchasing Managers’ Index (PMI) data released early this week.
On a Friday-to-Friday basis, the local note strengthened to 4.1340/1370 from 4.1500/1550 against the greenback.
It went down against the Singapore dollar to 3.0357/0395 from 3.0336/0384 but improved against the British pound to 5.2378/2432 versus 5.2468/2548.
Against the euro, the ringgit jumped to 4.7144/7199 from 4.7488/7550, but eased versus the Japanese yen to 3.8260/8298 from 3.7597/7653.