FXTM market analyst Han Tan said the uncertainties surrounding the make-up of the new government and its potential policy offerings would only serve to further dampen Malaysian assets that had already been battered by COVID-19 fears.
"US dollar/ringgit remained on the weaker side of 4.20, trading within the 4.21-4.24 range as the local currency contended with domestic political uncertainties as well as global pandemic fears.
"The near-term outlook for the ringgit is expected to remain clouded by this confluence of policy and economic uncertainties, as the risk aversion evident in global markets dampens the appeal of most Asian currencies amid the COVID-19 outbreak,” he told Bernama.
Tan noted that the markets were split about the prospects of another interest rate cut by Bank Negara Malaysia in the week ahead.
"Another 25-basis point reduction to the benchmark interest rate may result in the ringgit accommodating more weakness over the nea -term, although the softer currency would in turn help alleviate Malaysia’s economic pressures,” he added.
The central bank will hold its second Monetary Policy Committee meeting of the year on March 2 and March 3.
For the week just ended, the ringgit ended sharply lower against the US dollar at 4.2120/2180 compared with 4.1900/1940 on the previous Friday.
The ringgit was mainly affected by domestic political crisis and the ongoing COVID-19 situation.
Negative sentiment was capped by the announcement of the 2020 Economic Stimulus Package worth RM20 billion by interim Prime Minister Tun Dr Mahathir Mohamad to cushion the impact of COVID-19 on the domestic economy.
On a Friday-to-Friday basis, the local currency depreciated broadly against a basket of currencies.
It declined against the Singapore dollar to 3.0215/0269 against 2.9924/9957 previously and fell against the pound to 5.4343/4438 from 5.4110/4178.
The local note depreciated against the euro to 4.6517/6588 versus 4.5286/5346 a week earlier and eased against the yen to 3.8749/8815 from 3.7504/7550 previously - Bernama
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