KUALA LUMPUR - The ringgit is expected to remain volatile driven by uncertainty of the external sector especially the US economic outlook and the potential tapering of quantitative easing (QE) programme by the US Federal Reserve.
HSBC Bank Ltd head of Asian currency research Paul Mackel (pic) said the external factors were the bigger drivers for the ringgit volatility compared with domestic factors, of which was the country's thinning current account surplus.
"Now that the general election is over and Budget 2014 tabled, going forward the main driver would be the external environment, focusing on the US Federal Reserve's tapering of QE," he told reporters at the HSBC Economic and Foreign Exchange Outlook 2014 yesterday.
The ringgit began sliding in late May as foreign funds pulled from emerging markets on hints that the Federal Reserve may taper off its US$85bil bond-buying programme. The ringgit hit a three-year low of RM3.33 (S$1.30) against the US dollar on Aug 28.
Mackel opined that there was 50 per cent chance the Federal Reserve might taper its QE programme next month.
He expects the ringgit to depreciate to RM3.30 against the US dollar by end-2014.
"It would be a bumpy ride for the ringgit against the US dollar into next year and that other Asian currencies are going to remain fairly volatile," he said.
He expected that the ringgit to close at RM3.18 against the greenback by year-end and that the ringgit would remain relatively more volatile than other currencies in the Asian region, but not as much as the rupiah and rupee.
The ringgit closed lower against the US dollar yesterday to RM3.211 from RM3.209 on Tuesday.