- The Ringgit has depreciated by 2.3% from end-May (or -7.3% YTD) to 3.753 per USD by yesterday’s close. Meanwhile, the Dollar Index closed at 1,180.46 points yesterday (or +4.4% YTD).

- Asian currencies were weak during the start of June. Based on the Bloomberg’s Asia Dollar Index, it slipped to 111.56 points yesterday, which is a decline of 1.1% YTD.

- The Ringgit had posted a deeper depreciation on a YTD basis compared to its regional counterparts. More significantly, the Ringgit fell against all major currencies during the start of June (refer to Chart 2).

- In early June, the most severe decline for the Ringgit was against the EUR. At yesterday’s close, the Ringgit stood at 4.234 per EUR, or slumped by 5.4% from end-May.

- On a YTD basis, the Ringgit has traded at an average of 3.63 per USD. That compares to 2014 when the Ringgit traded at an average of 3.27 per USD and ended the year at 3.50 per USD.

- In part, the slump of the Ringgit currency is attributable to downside risk ahead, pending on the upcoming review by Fitch Ratings in July 2015.

- To date, Fitch’s major concerns which are likely to remain a credit weakness for Malaysia include:- i) deterioration in current account balance; ii) upward revision in fiscal deficit target, and iii) rising contingent sovereign liabilities.

- Note that the USD has strengthened against major currencies at the beginning of June, except for EUR, AUD, and GBP (refer to Chart 2 - Regional Currencies vs. USD).

- A pick-up in hiring last month uplifted hopes that the Fed could raise rates in September 2015. Mostly, nonfarm payrolls had been increasing by at least 200,000 per month since March 2014, except for March 2015.

- Data released last Friday showed that the nonfarm payrolls in the US increased by 280,000 last month, compared to 221,000 in April. Thus, unemployment rate remained unchanged at 5.5% in May.

- The unemployment rate in the US has tapered from 6.7% as at end-2013 to 5.5% last month, which is not far above the Fed’s long-term target of 5.0% to 5.2% range.

- According to the FOMC’s quarterly Summary of Economic Projections in March, the Fed’s median estimates for interest rate at the end of 2015 and 2016 are 0.625% and 1.875%, respectively.

- Elsewhere, the international reserves at BNM dipped by 8.2% YTD to USD106.4bil as at end-May. It is able to finance 8.2 months of retained imports and 1.1 times the short-term external debt.

- However, Malaysia’s reserves level had improved over the last couple of months compared to March 2015 when it fell to USD105.1bil. At end-March, Ringgit closed at 3.717 per USD vs. 3.652 as at end-May.

Source: AmeSecurities Research - 10 Jun 2015