KUALA LUMPUR: The ringgit is flirting with its lowest level against the US dollar in nearly 25 years but economists believe the local currency will bounce back when the greenback "returns to normalcy".
Last Friday, the ringgit fell to 4.4810 per US dollar, the lowest it has been since January 2017.
As crude and palm oil prices go down, the ringgit's value could inch closer to 4.5002 versus the dollar, which was last seen in January 1998.
Putra Business School associate professor Dr Ahmed Razman Abdul Latif said Malaysia's higher export value including its commodity plus continued buying of local equities by foreign investors would cushion the blow of the greenback ascendency.
"The continuous strengthening of US dollar is due to threat of recession and possible additional hikes on its interest rate, but these factors are not long lasting and once it returns to normalcy, we will start to see the strengthening of ringgit again," Ahmed Razman told the New Straits Times today.
Juwai IQI chief economist Shan Saeed said the stronger US dollar was getting deeper into the markets as the greenback became a safe haven due to recessionary fears in advanced economies and global economic fragilities.
He added that all currencies were down by about 3.0-20.0 per cent against the US dollar.
Shan said Juwai IQI had maintained its ringgit to US dollar forecast at 4.05-4.35 by year-end.
"The US Federal Reserve (Fed) will continue to hike rates as inflation becomes stubborn and serious in the US. The Fed's real pivot is unfolding under our eyes.
"But once the US dollar depreciates significantly in the market, all emerging markets' currencies will come out stronger with appreciating note," he added.
Shan said moving forward, the local currency would benefit from the higher trade and commerce numbers, higher commodity prices, as well as the continuation of foreign direct investment flow into the Malaysian market.