In a fluctuating foreign exchange market, the Malaysian ringgit took a step back from its recent gains against the US dollar, succumbing to the prevailing risk-averse sentiment. The local currency faced increased demand for the greenback, as investors closely monitored the unfolding Israel-Palestine conflict and its potential global ramifications.
As the clock struck 6 pm on 9 October 2023, the ringgit was quoted at 4.7295/7335 against the US dollar, down from its Friday close of 4.7115/7155. Dr. Mohd Afzanizam Abdul Rashid, Chief Economist and Head of Social Finance at Bank Muamalat Malaysia Bhd, provided insights into the situation. He noted the uncertainty surrounding the Israel-Palestine conflict and the impact it could have on the financial markets.
The tension in the region has the potential to drive up crude oil prices, given its proximity to major oil-producing countries. Moreover, this conflict could draw in key global players such as the United States, Europe, Iran, and other Middle Eastern nations. Consequently, a palpable sense of risk aversion has emerged, leading to an increased demand for the US dollar.
The US Dollar Index (DXY) reflected this sentiment with a 0.24 percent increase, reaching 106.295 points. Despite this, the US dollar-to-ringgit exchange rate remained at RM4.7285, hovering just below the immediate resistance level of RM4.7495. Dr. Mohd Afzanizam anticipates that the ringgit will continue to face pressure in the near future, with market participants closely monitoring developments in the Israel-Palestine conflict for potential repercussions.
The ringgit's performance extended beyond the US dollar, as it weakened against a basket of major currencies. Against the Japanese yen, it slid to 3.1716/1745 from 3.1612/1641 at the close of trading on Friday. Similarly, it depreciated against the euro, trading at 4.9811/9853 compared to 4.9720/9763. The British pound also saw the ringgit's value decline, with the exchange rate falling to 5.7634/7682 from 5.7494/7543.
Conversely, the ringgit exhibited mixed results against other ASEAN currencies. It gained ground against the Philippine peso, trading at 8.30/8.31 compared to the previous close of 8.32/8.33. Against the Indonesian rupiah, the ringgit edged higher, quoted at 301.3/301.7 from 301.7/302.1 previously. However, it faced downward pressure against the Thai baht, slipping to 12.7435/7588 from 12.7200/7367 on Friday. The Singapore dollar also saw the ringgit weaken, with the exchange rate settling at 3.4542/4574 compared to 3.4458/4493 previously.
The ringgit's recent decline against the US dollar can be attributed to a climate of risk aversion driven by geopolitical tensions, particularly the Israel-Palestine conflict. As global economic and political factors continue to evolve, the currency markets remain dynamic and subject to rapid changes. Investors and market participants must remain vigilant and adaptable in navigating these challenging conditions.
Reference: Ringgit retreats to end lower against US dollar | Malay Mail
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