KUALA LUMPUR: Currency market volatility is far from over for Malaysia and its peers in Asia, as investors remain anxious over another potential exodus of funds from emerging markets.
Analysts expect volatility to remain until uncertainty over what US president-elect Donald Trump will do when he takes charge next year lifts.
There is concern that Trump's fiscal and pro-business policies would lead to higher inflation and interest rates. If the US Federal Reserve raises rates faster than expected, it will drain cheap funding from emerging markets.
The US Federal Open Market Committee (FOMC) will next meet on Dec 13 – its first since Trump’s win – to decide on the direction of interest rates. The FOMC’s statement will provide more clues to market players.
The ringgit is currently trading at RM4.33 against the greenback. It was one of the worst-performing currencies in Asia last week, falling 3.28 per cent against the dollar, forcing Malaysia’s central bank to issue a statement on Friday to calm markets and to ensure proper price discovery.
Bank Negara also said it will curb speculative activity in offshore markets, which has driven the currency far off from the country’s fundamentals.
Among major Asian currencies, only the Yen performed worse than the ringgit, declining 3.31 per cent.