The Malaysian ringgit is set for its worst month in over nine years, dropping more than 6% against the US dollar this October as investors turn cautious before the US presidential election.
According to Bloomberg, on Wednesday (Oct 30), the ringgit was trading at 4.39 per dollar, marking its biggest monthly fall since August 2015. However, analysts believe that a win for Democratic presidential candidate Kamala Harris could partly change the currency’s course near-term, potentially strengthening it due to a reduced risk of US tariffs on Asian economies.
The recent strength of the US dollar is putting significant pressure on Asian currencies, with most facing difficulties in October as traders reevaluate the timing of Federal Reserve interest rate cuts and steer clear of risky investments ahead of the US election.
However, according to Oversea-Chinese Banking Corp (OCBC) the ringgit is partly a victim of its own success. It gained 14% against the US dollar in the last quarter, making it the best-performing currency in Asia, which created room for a correction this month.
Christopher Wong, OCBC Singapore’s currency strategist, noted that the recent rise in the ringgit created “more room for corrective play.”
“The ringgit’s sensitivity to the yuan and the yen is also one of the highest in the region, which helps explain why it is suffering more than the rest,” he added.
Only the Japanese yen has done worse than the ringgit in October across Asia, falling by around 6.3% against the US dollar, while China’s offshore yuan was down about 2% against the US dollar.
The near-term future of the ringgit depends partly on the US election results. Analysts from OCBC and MUFG Bank predict the currency will strengthen if Kamala Harris wins, as it would lower the chances of tariffs that could hurt Asian economies.
MUFG expects the ringgit to rise to 4.12 per US dollar by the end of the year, while OCBC predicts it could reach 4.22. /TISG
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