Analyst warns of further slide as ringgit hits 1-year low against US dollar

PETALING JAYA: An analyst predicts further weakness in the ringgit after Bank Negara Malaysia’s (BNM) move to cut interest rates last week, and as the currency reaches its lowest level in a year against the US dollar.

Pong Teng Siew, head of research at Inter Pacific Securities Sdn Bhd, said the rate cut would not do much to spur the economy as income levels are low.

“On the corporate side, companies have weaker revenue and will not be motivated to borrow,” he told FMT.

The ringgit hit RM4.17 against the US dollar today, its lowest level since a year ago.

Pong said further weakness is expected in the ringgit.

“The last time BNM cut rates was in July 2016, under previous governor Muhamad Ibrahim. The ringgit was trading at RM3.85 against the greenback at that time, but six months after that, the local currency slid to RM4.50 and beyond.

“I see this trend recurring this time around.”

Crude palm oil, which contributes 5 to 6% of the gross domestic product (GDP), is hovering at below RM2,000 per tonne levels while crude oil has yet to completely regain its lustre. Prices have nevertheless recovered somewhat and are at around US$70 per barrel.

The trade war between China and the US has also affected Malaysia as an exporter of intermediary goods. Higher tariffs translate to higher prices and reduced demand, which is a negative for the country.

The stock market barometer also dipped below the psychological 1,600 points barrier on Monday for the first time since January 21, 2016. Foreigners have sold Malaysian equities to the tune of RM3.3 billion since the beginning of the year.

BNM will release its Q1 2019 GDP figures tomorrow. Judging by the economists it has polled, Bloomberg puts the consensus GDP at 4.3%. Malaysia recorded GDP of 4.7% for 2018.