Ringgit extends fall against greenback as US 10-year Treasury yield hits 5%

KUALA LUMPUR: The ringgit extended its decline to close lower against the US dollar on Monday as the 10-year US Treasury yield hit 5 per cent while geopolitical tension in the Middle East further spurred a risk-off sentiment.

At 6 pm, the local currency slipped by 0.49 per cent to 4.7900/7975 against the greenback from Friday’s close of 4.7655/7700. The ringgit is now hovering at 25-year lows.

The yield on the benchmark 10-year US Treasury bond rose nine basis points to 5.014 per cent at the time of writing.

Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said the local currency has also continued to remain weak as investors worry about how the Mideast conflict will play out.

“I believe the markets are still wary about the possible ground offensive (into Gaza) by Israeli forces (while) the unwavering support from developed countries for Israel could result in further escalation in the region.

“On that note, foreign exchange markets will continue to remain risk averse which would result in higher demand for the US dollar,” he told BK.

Earlier, Deputy Finance Minister I Datuk Seri Ahmad Maslan stated that external factors have continued to drive the performance of the ringgit and regional currencies. He said one factor driving the ringgit’s performance this year was the expectation that the US interest rate would remain higher for longer.

Central bank governor Datuk Abdul Rasheed Abdul Ghaffour said today that Bank Negara Malaysia (BNM) will do whatever is necessary to ensure the ringgit continues to adjust in an orderly manner. The central bank has a number of market measures that can be deployed to boost the ringgit if needed, he added.

Abdul Rasheed stressed that while the ringgit’s level versus the US dollar has touched the Asian financial crisis level in 1998, the country is not in a crisis based on its strong fundamentals, as reflected by its economic growth and well-capitalised banking system, among others.

The governor explained that the currency market is operating in an environment of a strong US dollar, and the financial markets are further affected by recent geopolitical developments.

“Almost all currencies in the world depreciated against the US dollar, especially those in emerging markets, including Malaysia,” he said.

At the close, the ringgit was traded lower versus a basket of major currencies.

It slipped against the British pound to 5.8179/8270 from 5.7777/7831 at the close on Friday and depreciated vis-a-vis the euro to 5.0736/0815 from 5.0462/0510. It was lower against the yen at 3.1935/1985 from 3.1781/1813 previously.

The local note was also traded lower against other Asian currencies.

The ringgit weakened against the Thai baht to 13.1104/1359 from 13.0504/0681 and slid against the Singapore dollar to 3.4872/4932 from 3.4731/4767 on Friday.

It also fell vis-a-vis the Philippine peso at 8.43/8.44 from 8.38/8.40, while flat versus the Indonesian rupiah to 300.5/301.2 from 300.1/300.7 previously. – BK