KUCHING: Despite the rise of the ringgit in the first week of April, analysts believe that the currency will likely stay weak and trade at around RM3.60 to RM3.70 against the US dollar in the near term.
RHB Research Sdn Bhd (RHB Research) in its economic highlight report, opined that this is on account of the large foreign holdings of fixed income instruments in the country.
It also pointed out that the ringgit could be affected by the expectation of the US increasing its interest rate and news about the possibility of a sovereign credit rating downgrade by the Fitch Rating could still come back to haunt the ringgit again.
Meanwhile, on the performance of the ringgit last week, the foreign exchange reserves in Malaysia fell by US$5.4 billion in March to US$105.1 billion as at March 31, compared with a decline of US$0.1 billion in February.
“In ringgit terms, the foreign exchange reserves, however, rose by RM3.7 billion in March to RM389.7 billion as at March 31, after falling by RM0.5 billion in the previous month, due mainly to revaluation gain as the ringgit weakened against major currencies.
“The decline reflected partly the payment of import bills and probably made worse by the outflow of foreign short-term capital.
“These were, however, mitigated by repatriation of export proceeds. At the current level, the foreign exchange reserves are sufficient to finance 8.1 months of retained imports and cover 1.1 times the short-term external debt of the nation, compared with 9.2 months of retained imports in the same period a year ago,” the research team explained.
Despite the fall in the foreign exchange reserves, the ringgit reversed its course and strengthened by 2.3 per cent against the US dollar in the first week of April, after depreciating by 2.4 per cent in March.