KUALA LUMPUR: The ringgit is likely to trade between 4.45 and 4.50 against the US dollar by year-end if China, the world’s second largest economy, were to devalue its currency again.
The local currency, which lost 16% so far this year, was trading against the US dollar at 4.1780 and 4.1850 this morning.
Rabobank head of financial markets research Asia-Pacific director, Michael Every, said if China did not devalue its currency by year-end then the ringgit would not see any downward pressure.
On whether China’s devaluation has more impact on the ringgit than the likely US Federal Reserve’s (Fed) interest rate increase, he said both were equally vital.
“If the Fed were to raise the interest rate it will be very significant, but we cannot underestimate how important China is, particularly in Asia and particularly to commodity producers like Malaysia,” said Every.
He told reporters this on the sidelines of Rabobank’s Exclusive Business Forum here yesterday.
Every said commodity prices would be adversely impacted by the slowdown in China’s market.
He said Chinese devaluation would see the markets pushing down other Asian currencies, particularly currencies of commodity exporters like Malaysia.
“The oil prices would also definitely decline further by US$20 (RM83.60) per barrel if China were to devalue its currency again,” he said.
Every said the best everyone could do now was to accept the fact that market volatility would be the new norm.
“Regrettably, Malaysia is not alone in this problem. Many other countries are suffering too, but this is something we all have to face for the next few years,” he said. – Bernama
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