Short on Ringgit?

Ringgit expected to fall to RM3.50 against USD........

27-08-2008: Ringgit falls to 10-mth low
by Ellina Badri (The Edge)

KUALA LUMPUR: The ringgit fell to a 10-month low of RM3.3910 against the US dollar yesterday, as it slid for a second straight day on concerns a global economic slowdown could hurt exports and after Bank Negara Malaysia (BNM) kept interest rate at 3.5% on Monday.

The ringgit slide came amid soaring inflation at 8.5% in July, the highest in almost 27 years. BNM, however, decided to maintain the overnight policy rate (OPR), seeing the economic downturn as a greater risk than inflation.

In a research note, Goldman Sachs said that although the country’s strong current account surplus and undervalued currency would support the ringgit in the medium term, BNM’s interest rate reaction could hurt the ringgit’s value further.

“The risks associated with sluggish central bank responses as well as the unsettling political landscape could further hurt the ringgit’s sentiment in the near term,” it said.

Meanwhile in a Bloomberg report, CIMB Investment Bank Bhd rates and currency strategist Suresh Kumar Ramanathan said: “The focus has shifted to slowdown concerns and the bias is for a weaker ringgit. Investors are also keeping an eye on the risks associated with the by-election.”

In Singapore, Sumitomo Mitsui Banking Corp analyst Tetsuo Yoshikoshi said the ringgit was expected to fall further to RM3.50 versus the greenback by year-end, against a previous forecast of RM3.295.

“I would say 80% of the decline in the ringgit is in line with other Asian currencies, due to the perception that the global economy and Asian economies will slow down.

“The other 20% is the perception that the central bank is behind the curve in tackling inflation. You can compare the ringgit with the Singapore dollar. There’s been some loss of confidence,” he said.

He added most Japanese investors were now not interested in Malaysia, as the political situation was “quite bad”, affecting the country’s economic success story.

Reuters data showed the local currency has been among the worst performers in Asia in the past four months, falling more than 7%. On the offshore market, it slid to RM3.389 to the US dollar in six-month non-deliverable forwards, against RM3.371 on Monday.