The renminbi which started at 6.53 against the US dollar, reached its three-year high (since June 2018) of 6.37 against the US dollar, translating to a 2.5 per cent appreciation by the end of May 2021. — AFP photo
KUCHING: Analysts with AmBank Bhd (AmBank Research) expect the ringgit to weaken against both the US dollar and Chinese renminbi, while reiterating its ringgit outlook to the US dollar at 4.15–4.20 with the upside at 4.30 by end-2021.
AmBank Research chief economist Dr Anthony Dass and economist Muhamad Farid Anas Johari noted that the domestic currency started the year off strongly at 4.02 against the US dollar.
However, by end-May 2021, the ringgit had depreciated by 2.6 per cent to 4.12, its eight-month low since October 2020.
“Despite surging global commodity prices, and improving global economy and trade outlook, the local currency took a hit from rising domestic Covid cases, slow vaccination speed and domestic political uncertainties with the pace of economy recovery weighed down by the impact of the second movement control order (MCO 2.0) earlier this year,” the economists said in a review
Meanwhile, the renminbi which started at 6.53 against the US dollar, reached its three-year high (since June 2018) of 6.37 against the US dollar, translating to a 2.5 per cent appreciation by the end of May 2021.
This was amidst surging global commodity prices and raised suspicion that the People’s Bank of China had deliberately used the yuan depreciation earlier to curtail rocketing imports.
“Due to the tight correlation between both currencies and the US dollar of around 0.64 per cent, the ringgit fell by 4.7 per cent against the renminbi between January and end-May.
“The renminbi-ringgit exchange rate hovered between 0.62 and 0.65 during the period.
“However, the trend for both the MYR and RMB had turned negative since end-May 2021. From early June until September 3, the ringgit had dropped by 0.5 per cent to 4.15 against the US dollar, while the renminbi fell by 1.2 per cent to 6.46 against the US dollar.”
Looking ahead, the ringgit’s outlook against the US dollar is seen to come under slight downward pressure.
“We expect the ringgit to continue its depreciation trend against the US dollar in the remaining months of 2021. It will likely range from 4.15 to 4.20 levels and with room to reach 4.30 by end-2021,” the economists said.
“With both the ringgit and renminbi seen to be on a weakening trend against the US dollar, we expect the renminbi-ringgit to hover around the 0.63–0.66 levels for 2021 with the upside to 0.66 should the ringgit’s weakening trend be far more significant compared to renminbi against the US dollar.”