KUALA LUMPUR, Feb 20 — The People’s Bank of China (PBOC) unexpectedly cutting its key borrowing rate more than what the market anticipated drove major regional currencies, including the ringgit, to trade lower against the US Dollar, mirroring the trend of the Chinese renminbi.
At 6pm, the ringgit slipped lower to 4.7975/8000 against the greenback compared to yesterday’s close of 4.7850/7890.
According to Bloomberg, the local currency briefly slipped past 4.8 against the dollar on Tuesday, its weakest level since reaching an all-time low of 4.8850 in 1998.
The ringgit’s immediate resistance is now at RM4.80 after breaching 4.7958 today.
The market’s jitters were caused by the PBOC’s 25-basis-point reduction in the five-year loan prime rate (LPR) to 3.95 per cent, which is greater than the market’s expectation of a 10-basis-point reduction.
Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said sentiments are cautious ahead of the release of the FOMC meeting minutes on February 21.
The ringgit was generally weaker against the US dollar today (-0.11 per cent) along with the Chinese renminbi (-0.06 per cent), Indonesian rupiah (-0.06 per cent), Taiwanese dollar (-0.13 per cent), and the Philippine peso (-0.18 per cent).
“Given that the US Federal Reserve is unlikely to reverse its course on monetary policy, the US dollar should be well supported in the near term.
“This is especially true when the odds for a US rate cut in March meeting has been greatly reduced from 81.5 per cent in early January 2024 to 11.6 per cent at present,” he told Bernama.
Afzanizam said he expects the ringgit to remain weak in the near term.
Responding to the ringgit’s performance, Bank Negara Malaysia governor Datuk Abdul Rasheed Ghaffour reiterated that the current level of the ringgit does not reflect the positive prospects of the Malaysian economy going forward.
“The performance of the ringgit, similar to other regional currencies, has been influenced by external factors. Some of these factors include market adjustment to changing US interest rate expectations, geopolitical concerns and uncertainty surrounding China’s economic prospects,” he said.
Meanwhile, the ringgit was weaker against a basket of major currencies.
It fell further vis-à-vis the Japanese yen to 3.1926/1945 from 3.1913/1942 on Monday’s close, slipped against the British pound to 6.0468/0499 from 6.0358/0408, and declined versus the euro to 5.1799/1826 from 5.1558/1601 previously.
Similarly, the ringgit was easier against most Asean currencies.
It weakened versus the Thai baht to 13.3016/3148 from 13.2806/2976 at Monday’s close, slid versus the Singapore dollar to 3.5672/5693 compared with 3.5555/5587 and was almost flat against the Indonesian rupiah at 306.3/306.6 from 306.0/306.5 previously.
The local note was easier against the Philippine peso at 8.56/8.57 from 8.53/8.54 yesterday.
— Bernama
