KUALA LUMPUR: The ringgit extended its downtrend against the US dollar this morning due to the stronger US dollar Index (DXY), as the United States (US) Federal Reserve chair Jerome Powell reiterated his stance to keep raising interest rates in a bid to quell the rising inflation, an *** yst said.
At 9 am, the local currency depreciated to 4.4020/4045 against the greenback from 4.3980/4010 at the close yesterday.
Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the DXY settled higher last night at 105.104 points.
He said during the European Central Bank panel session, Powell indicated that the US economy is in strong shape and is well-positioned to withstand the impact from the tighter monetary policy.
"As such, the ringgit should continue to linger around RM4.40 level against the US dollar," he told Bernama.
Additionally, he said sentiments are expected to remain wary as recession fears are building up in the US.
"This is due to the close correlation between the US’ and Malaysia’s gross domestic product (GDP). Therefore, any hiccups in the US growth could be tran *** itted to Malaysia," he added.
Commenting on an article which stated that the surging US dollar has set Asian currencies on course for their worst quarter since 1997, Mohd Afzanizam said the country needs to prepare for any eventualities.
"We are looking at an environment where volatility has become more extreme. The worst level ever achieved for the dollar-ringgit pair was RM4.7125 on Jan 9, 1998. Will it revisit such a level again? Only time will tell," he said.
According to the article, most emerging Asian currencies had declined on Wednesday, led by the South Korean won as investors sought the safety of the US dollar due to rising concerns of a recession in the US.
It said the Bloomberg JPMorgan Asia Dollar Index is poised for a 4.4 per cent drop this quarter -- the steepest since 1997 when the Asian financial crisis pummelled currencies.
Meanwhile, the ringgit was traded mostly higher against a basket of major currencies.
The local note rose against the British pound to 5.3379/3409 from Wednesday's close of 5.3480/3516, gained against the Singapore dollar to 3.1596/1619 from 3.1645/1671 and strengthened against the euro to 4.5966/5992 from 4.6227/6259 previously.
However, the local currency depreciated versus the Japanese yen to 3.2228/2251 from 3.2217/2242 yesterday. - Bernama
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