KUALA LUMPUR, Aug. 16 (Xinhua) -- Malaysian ringgit fell to one-year low against the greenback on Monday as political uncertainty and high COVID-19 infections dragged market sentiment.
The ringgit, which traded at between 4.2338 and 4.2445 against the U.S. dollar (USD) on Monday, was last traded at 4.2400 at 5:00 p.m. local time, the lowest since July 2020.
Year to date, the ringgit has depreciated 5.37 percent against the USD.
OANDA Asia Pacific's senior market analyst Jeffrey Halley said the weakening of the ringgit on Monday might be due to the resignation of Muhyiddin Yassin as Malaysian prime minister, as this will deepen the political uncertainty that has been dogging the ringgit of late.
Additionally, he said, Malaysia's ongoing COVID-19 woes have been dampening sentiment for some time.
"I expect the ringgit to test 4.2500 against the USD and then 4.3000 imminently. Looking further out, I expect the ringgit to move above 4.3000 against the USD as I do not expect Malaysia's political situation to resolve itself anytime soon," he told Xinhua.
Muhyiddin on Monday stepped down as Malaysia's prime minister as he has lost the majority support in the parliament. Malaysia's King Sultan Abdullah Sultan Ahmad Shah appointed him as the caretaker prime minister until a suitable replacement is determined.
Kenanga Research said in a note Monday, the ringgit struggled to retain its strength as domestic COVID-19 cases continued to climb and Brent crude oil price continued to test the 70 USD per barrel level.
"Ringgit is seen to trade between 4.23 to 4.25 this week, as the rapid spread of the Delta variant cases across the globe may continue to unnerve the oil markets, dragging the Brent crude oil price lower," it said.
According to the research house, the ringgit has the potential to test the 4.30 threshold as the prime minister announced his resignation on Monday.
Meanwhile, MIDF Research said that due to the increased expectation for unwinding of the easy monetary policy by the U.S. Federal Reserve in the later part of the year, it expects the ringgit to end the year weaker than its previous forecast.
"For 2021, we believe the ringgit will remain on an appreciating trend towards the end of the year, supported by sustained current account surplus, high commodity prices and improved confidence when the economy reopens later this year," it said.
However, taking into account the ringgit's recent weakness, the research house adjusted its projection for the USD versus ringgit rate to average 4.13 in 2021, from previous forecast of 4.07.
It also anticipated the ringgit to move towards 4.10 from its previous forecast of 4.05 by the end of the year.