Ringgit Suffers Largest Decline in Nine Years Amid US Election Concerns
Malaysia's currency, the ringgit, has experienced its sharpest decline in nearly nine years, driven by investor concerns over the upcoming United States presidential election. The sell-off occurred as investors moved away from riskier assets, including those in emerging markets, amid growing global uncertainties.
In October, the ringgit fell more than 6 percent against the US dollar, marking its largest monthly loss since August 2015. By Wednesday, October 30, the ringgit was trading at around 4.39 per US dollar.
The recent strength of the US dollar has put significant pressure on most Asian currencies, including the ringgit. This pressure is largely due to market reassessments of potential interest rate cuts by the Federal Reserve, which has reduced the appeal of emerging market assets.
Global Uncertainty Increases Pressure on the Ringgit
The heightened uncertainty surrounding the US presidential election has worsened the situation.
Investors are becoming more cautious, avoiding riskier assets in the lead-up to this pivotal political event. As a result, the ringgit, like many other Asian currencies, has been under considerable pressure throughout October.
Read also: Malaysia Joins BRICS: Amplifying Its Global Voice and Expanding Market Reach
Ringgit's Short-Term Outlook Tied to US Election Results
According to analysts, the ringgit's short-term performance will be closely tied to the outcome of the US election. A report by The Business Times highlighted that analysts at OCBC and MUFG Bank predict the ringgit could recover if Democratic presidential candidate Kamala Harris wins the election.
Harris' victory is expected to ease concerns over trade tariffs that could negatively impact Asian economies, including Malaysia.
MUFG forecasts that the ringgit could strengthen to 4.12 per US dollar by the end of the year, while OCBC projects an increase to 4.22 per dollar. These predictions reflect optimism that favorable elections could lead to more stable global trade policies, ultimately benefiting Asian currencies.
