Ringgit weakens against US dollar; one of weakest Asian currencies in last one month

Ringgit weakens against US dollar; one of weakest Asian currencies in last one month
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KUALA LUMPUR (May 8): The ringgit has weakened to 3.948 against the greenback, the weakest level since three months ago. It is one of the weakest currencies in Asia over the last one month.

In Asia, the ringgit has fallen by 1.95% from a month ago, outperforming only the Taiwanese dollar, Japanese yen and Indian rupee during the one-month period. Other currencies such as the Singapore dollar, Indonesian rupiah, Thai baht, Korean won, renminbi, Hong Kong dollar and Philippine peso outperformed the ringgit in that period.

The weakness in the local currency occurred despite crude oil breaking the US$75 per barrel level. At the time of writing, it was trading at US$75.58 per barrel.

It is worth noting that the weakness coincided with the renewed strength in the US dollar as investors look at the possibility of faster-than-anticipated inflation, which would lead to more aggressive rate hikes that could trigger an outflow from emerging market currencies.

FXTM global head of currency strategy and market Jameel Ahmad has highlighted in his note that the weakness seen in emerging market currencies including the ringgit suggests that there is an increased confidence that the Federal Reserve will raise US interest rates in June.

A local bank-backed economist agreed with this view, adding that another factor at play is the general election, which could have led to some foreign funds exiting in the last one month.