KUALA LUMPUR: The Turkish lira crisis has added fuel to the ringgit fall, prompting economists to revise the currency year-end target downward again.
The last target revision about a month ago had just taken account of the trade tension between US and China as one of the factors to the currency fall, other than the increasing interest rates in the US.
Now with the rising concern over the possibility of a contagion across emerging market currencies, economists expect the ringgit, which had not yet to recover from RM4.10 since last Wednesday, may continue to weaken.
Other than the prospects of higher US interest rates and rising treasury yields, Socioeconomic Research Centre executive director Lee Heng Guie said fears of a contagion risk in the emerging markets would continue to weigh on the ringgit.
“The narrowing yield between Malaysia and US assets (after the US interest hike) could make ringgit asset less attractive,” he added.
AmBank group chief economist and head of research Dr Anthony Dass said the impacts on ringgit were mostly coming from the global market, with lira crisis being the additional factor.
According to Bloomberg, RBC Capital Markets said that ringgit may have scope to weaken further as bad news has not been priced in.
The currency, along with rupee and rupiah, are the most vulnerable in Asia from an external liquidity perspective, the firm said.
However, Malaysian Rating Corp Bhd said the downside of the ringgit would be capped by strong economic fundamentals in the medium term.
“We also believe that, aside from external factors, internal factors that determine the ringgit’s trajectory against the greenback would include the government’s medium-term deficit, debt reduction plans and economic growth trajectory,” it said.
Economists, surveyed by Bloomberg, had revised downward the ringgit year-end target again to RM4.03 against the US dollar from RM4 last month.
Last month, the target was revised downward from RM3.93.