KUALA LUMPUR: The ringgit hit a fresh intra-day low of 4.4250 against the greenback as foreign funds continued to exit emerging markets amid expectations that the US Federal Reserve (Fed) would likely raise interest rates by year-end.
The ringgit hit its lowest of 4.4250 against the US dollar at 4:30 pm yesterday, putting the currency closer to its 17-year ebb of 4.7125 recorded on Jan 9, 1998, just before Bank Negara pegged the ringgit to the US dollar at 3.8000 in September in the same year.
The benchmark FTSE Bursa Malaysia KL Composite Index (FBM KLCI) followed the ringgit’s decline, sliding 6.58 points to 1,608.43 at the end of trading yesterday.
“We may see some more selling today from the lack of fresh leads, with the index again retesting the 1,600 mark. Last Friday saw more foreign selling with a net outflow of RM202.7mil, pushing the week’s total net outflow to RM1.27bil,” said BIMB Securities in a market preview report yesterday.
Meanwhile, MIDF Research described the current capital market environment as a case of a sudden reversal.
“Foreign funds made a hasty exit from Asian equity last week, soon after chalking up a promising inflow the week before.
“Selling was aggressive across all markets. The hardest hit were the more developed North Asian markets of Taiwan and South Korea.
“The outflow last week was clearly driven by apprehensions over emerging markets as a whole. What we had hoped to be a promising sustainable turnaround in the week before turned out to be ephemeral,” it said.
The FBM KLCI gained some ground in the middle of this month, reaching 1,674.2 points on Sept 16.
MIDF Research added that last week’s attrition raised the cumulative net foreign outflow to RM17.7bil year-to-date, significantly surpassing the RM6.9bil outflow for the whole of 2014.
JF Apex Securities Research highlighted a Bloomberg report which said the dollar held gains from its best week since July, as investors looked for further signs that the US economy was strong enough for the Fed to raise interest rates by the end of this year.
“The greenback advanced against all of its 16 major counterparts last week after a report on Friday showed the world’s largest economy expanded more than previously forecast in the second quarter, and Fed chairman Janet Yellen said the central bank was on track to increase rates by December,” it said. According to a newswire report, Yellen emphasised that the Fed would likely entail an initial increase in the federal funds rate later this year, followed by a gradual pace of tightening thereafter.
The US government is expected to report rather “positive” figures for personal spending and prices soon. It is also to announce payrolls for this month on Oct 2.
Malaysia, meanwhile, will continue to be bogged down until such time by low commodity prices, such as the drop in crude oil prices as well as the slowdown of China’s economy coupled with internal political issues, which have created a confidence crisis of sorts among foreign investors, said analysts.
West Texas crude had lost 52 cents to US$45.18 at the time of writing yesterday.