PETALING JAYA: The ringgit extended its downward trend for the third trading day, falling 0.18% to 4.1935 against the US dollar today, the lowest in more than five months as the tariff dispute between the United States and China escalates into a full-fledged trade war following the US ban of Huawei.
Market analysts have expected the ringgit to depreciate to RM4.20 against the US dollar this week on shortened trading due to the Wesak Day and Nuzul Al-Quran public holidays. The currency was also expected to move in tandem with other Asian units this week as global risk sentiment remains delicate over the direction of the US-China trade war.
FXTM global head of currency strategy and market research Jameel Ahmad said most Asian stocks were in the red today, as regional currencies turned in a mixed performance against the greenback, showcasing its sensitivity to the US-China trade dispute outlook.
Concurrently, the dollar hit its highest level in a month against a basket of six major currencies as economic and political uncertainties swept through Europe and Asia.
Jameel said the political risks that are weighing on the European Union and the UK are translating into support for the dollar.
“As long as the US economy doesn’t show meaningful signs of a sharper economic slowdown and the trade tension concerns continue to linger in the atmosphere, this should help support the ‘resilient dollar’ narrative,” he said.
He added that markets appear to have priced in the recent deterioration in US-China relations, but remain on edge awaiting the next catalyst that could swing risk sentiment either way.
“Overall, the likelier base case for investors is that the US-China tensions will persist, which is a far cry from the prospects of a formalised US-China trade deal that anchored market expectations up until April,” said Jameel.
Tensions between the US and China heightened after US President Donald Trump banned Chinese tech giant Huawei from the US. A number of companies around the world followed suit to cut back their business with Huawei, including Google, Japan’s Panasonic and Britain’s largest mobile service provider EE.
On Bursa Malaysia, the FBM KLCI lost 1.87 points to 1,601.87 points today. Among other Asian bourses, Tokyo’s Nikkei 225 was down 0.6%, Hong Kong’s Hang Seng Index fell 1.6%, Shanghai’s Composite Index skidded 1.4% and Seoul’s Kospi slipped 0.3%.