Subdued outlook projected for ringgit

KUALA LUMPUR: The ringgit took a hit yesterday following the hung Parliament situation after the inconclusive results from the recent 15th General Election (GE15).

The outlook for the local currency will remain subdued until a resolution is found, which is expected to be resolved the earliest by today.

According to analysts, the political situation in the country is one of the factors that had contributed to the current ringgit’s performance, apart from other factors which are at play, including the US Federal Reserve’s planned rate hikes and China’s potential reopening.

As at its close yesterday, the ringgit weakened by 0.62% to 4.5810 per US dollar.

However, the ringgit strengthened against other neighbouring currencies such as the Singapore dollar by 0.11% to 3.3135 per Singapore dollar and the Thai baht by 0.33% to 12.6399.

“In the immediate term, it is how fast we can resolve the political stalemate of the hung Parliament.

“The sooner we form a coalition government, the faster it can ease investor sentiment on the ringgit.

“But this is only one of the many headwinds that are having a bearing on the ringgit’s performance versus the US dollar,” Socio Economic Research Centre’s executive director Lee Heng Guie told StarBiz.

“It is important that the new coalition government does the right thing to ensure political stability with market-friendly policies to help recover the sentiment and to be able to attract investments into the country via a stable government,” Lee added.

Meanwhile, SPI Asset Management’s managing partner Stephen Innes said a hung Parliament is not viewed as the ideal solution to ease Malaysia’s political discord and this is indicative as the Malaysian assets, including the ringgit, had opened weaker yesterday morning.

“Although the ringgit had reacted negatively to a hung Parliament, but in the long term, an eventual coalition government could mean more constructive policies and more checks and balances,” Innes told StarBiz.

“The more significant issue now is Covid-19 in China. Exporters were initially keen to reduce US dollar holdings at the weaker open.

“Still, any hope for a full recovery was dealt a cruel blow when Asia’s risk turned sour after news of lockdowns in several major cities in China.

“And this had hurt the broader Asia foreign exchange rates,” Innes added.

He noted the continued China lockdowns had pushed back the country’s reopening narrative wave that the ringgit was riding on last week.

AmBank Research said in its note that it expects the ringgit to trade between its support level of 4.550 and 4.560, while the resistance is at 4.600 and 4.610.

It said the immediate focus for Malaysia will be on the formation of the next government.