-  On Thursday, the Ringgit slipped to its weakest level since August 2013. This is due to investors’ speculation of a bullish Greenback spurred by an improving outlook for the US economy.

-  Malaysia’s economic sentiments had also dampened as headline inflation accelerated to its fastest pace in two years in December 2013.

-  The elevated inflationary pressure pushed real interest rate in December to negative territory for the first time since November 2011.

-  The Ringgit currency depreciated by 1.7% YTD to 3.3315 per USD on Thursday’s closing. The Ringgit closed above 3.30 per USD for four consecutive trading days.

-  On the other hand, the Bloomberg US Dollar Index, which tracks the currency against 10 major counterparts, had advanced by 0.9% year-to-date.

-  Ringgit is expected to stay under pressure as the QE tapering continues in the US. The Fed is expected to trim its bond-buying program in its upcoming policy decision on January 28-29.

-  To recap, the Federal Open Market Committee has affirmed that the low federal funds rate will be appropriate as long as the unemployment rate remains above 6.5% and inflation stays broadly within 2%.

-  Meanwhile, Malaysia’s monetary policy will probably remain status quo until the domestic economy starts to gather pace.

-  Elsewhere, the international reserves of BNM amounted to USD135.0bil (or RM442.3bil) as at January 15, 2014, which is an increase of RM0.1bil from end-December 2013.

-  The reserves position is sufficient to finance 9.6 months of retained imports and is 3.7 times the short-term external debt.

-  During the 2H of January, overall reserves had probably declined as BNM sold USD and bought the Ringgit to limit the depreciation of the local currency. 

Source: AmeSecurities