PETALING JAYA - Despite Bank Negara's recent initiatives to stabilise the falling ringgit, the currency fell further against the US dollar and is hovering at record lows against regional peers.
The ringgit weakened further to RM4.3950 (S$1.50) against the greenback at the close yesterday, having fallen from 4.2352 in just one week following the US presidential election.
More worryingly, the ringgit has continued to decline against regional currencies, which could mean that the bearish sentiment towards the currency may not be limited to speculative trading in the offshore US dollar-ringgit market.
The currency fell to a record low against the baht yesterday and was priced at 12.4017 per 100 baht.
Against the Singapore dollar, the ringgit was priced at 3.1057, or a new 52-week low.
Similarly, the Indonesian rupiah and Australian dollar both strengthened against the ringgit on the same day.
Graphic: The Star/ANN
The ringgit remains the second worst-performing currency this year behind the Philippine peso.
It is worth noting that the greenback actually weakened against its major peers, as US Treasuries edged higher ahead of American inflation data and an upcoming speech by Federal Reserve (Fed) Chair Janet Yellen that could provide an indication for future interest rate hikes.
"The ringgit is being driven down, as there is a 'perception gap' between the ringgit's underlying fundamentals and investors' concerns over further volatility ahead.
"There are also concerns over the prospect of lower trading liquidity, as foreign banks can no longer trade non-deliverable forwards (NDF) with local banks," said a currency market strategist.
In a bid to curb speculation against the ringgit, Bank Negara has urged banks to disregard the offshore rates from the NDF markets and use the central bank's officially quoted onshore rates instead.
Bank Negara has also told local banks to not quote prices on the ringgit based on the prevailing NDF rate.
Additionally, it has requested that non-resident banks that trade in the foreign exchange market attest that they will not engage in NDF-related transactions.
While the measures taken by Bank Negara may take some time until they are fully absorbed by currency dealers, local institutions seem to have fully complied with Bank Negara's directives.
According to Bloomberg data, several banks' buy and sell quotes for the ringgit was between RM4.389 and RM4.394, or close to the onshore rate of RM4.395 as at 5PM yesterday.
In contrast, the NDF rate for the ringgit was at RM4.41 to the US dollar, indicating bearish sentiment going forward.
MIDF Research said in a report that the ringgit faces more downside in the coming months.
"We expect that the current high yield and flow of funds into the US economy will continue until the Fed conducts the widely expected rate hike in December.
"Until then, the ringgit is likely to remain under pressure," it said.
In a bearish note last week, CIMB Research cautioned that the ringgit could head to as low as RM4.80 over the next six months should the current downtrend persists.