THE ringgit slid further to open lower at RM4.4 against the US dollar, the lowest since March 2020 following a hawkish stance by the US Federal Reserve (Fed) to tighten its monetary policy.
As at 9.19am, the local note stood at 4.4050/4080 versus the greenback from Wednesday’s close of 4.3960/3975.
The ringgit hit a record low on March 23, 2020, when it reached RM4.447.
Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said this is a reflection of heightened economic uncertainties, which in the current context is about the prospect of higher interest rates in the US and inflation outlook.
“Higher inflation rate is taking a toll on the consumer sector as business costs are rising, affecting their profit margin.
“The Fed is also adamant with their rate hike campaign which could possibly stoke much slower economic activities at some point in the future,” he told Bernama.
On Tuesday, Fed chair Jerome Powell said the Fed would keep raising rates until inflation comes down.
Afzanizam said major central banks are also likely to tighten their grip on monetary policy as inflation seems to be pervasive.
“So, the major central banks are really in a tough spot as they need to weigh between rising inflationary pressures and ensuring economic growth remains robust,” he said.
Besides, he said recession also appears to be the buzzword these days which has resulted in higher demand for risk-free assets such as the US Treasury bonds.
On another note, he said the export ban of agrofood-related products by certain jurisdictions is expected to amplify the extent of inflationary pressures.
Hence, foreign exchange players would continue to remain in the safe-haven currency.
The ringgit was, however, traded mostly higher against a basket of major currencies.
It appreciated against the Singapore dollar to 3.1693/1717 from Wednesday’s close of 3.1713/1728, increased vis-a-vis the euro to 4.6200/6231 from 4.6268/6284, and strengthened versus the British pound to 5.4406/4443 from 5.4554/4573.
However, it slid versus the Japanese yen to 3.4269/4295 from 3.4041/4055.
Import bill to soar
Prime Minister Datuk Seri Ismail Sabri Yaakob announced yesterday the Government would abolish AP for food imports with immediate effect to contain rising food prices.
“This will enable all parties to import any food items into the country. The Agriculture and Food Industries Ministry would later announce the details on the AP matter.
“Previously, there were APs to import beef and cattle but from today, these are no longer required and anyone can import whatever food items to ensure sufficient supply,” the Bera MP added.
It is to note that Malaysia’s food import is worth about RM50 bil annually. Given the scarcity of several food items due to the war in Ukraine and sliding ringgit, the country’s annual food import price tag is projected to escalate. – May 19, 2022
