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       PETALING JAYA: The ringgit continues to depreciate against the US dollar to its lowest level in almost two years at RM4.29, triggered by the weakening in the Chinese yuan.

       There are also other factors that are dictating the near-term direction of the ringgit including the strengthening of the US Dollar Index which measures the performance of the greenback against a basket of currencies.

       The US Dollar Index was at near its two-year high at 99.95 at press time.

       Economists said there was a confluence of factors that was causing a weakness in the ringgit with both external and internal factors at play.

       The ringgit has seen a depreciation since last week. It was trading at an average of RM4.20 to the dollar in March.

       AmBank group’s chief economist Anthony Dass said the ringgit has weakened in line with the yuan which was also weakening against the dollar.

       “The US dollar has strengthened, driven by the aggressive rate hike expectations with the May hike anticipated to be at 50 basis points,” Dass told StarBiz.

       There was also the possibility of a reversal of fund flow from emerging markets on the potential tightening of monetary policy.

       “Foreign equity flow into Bursa Malaysia has been in net buying position until recently. Foreign net selling since April 12 saw some RM38bil in outflow. This is in tandem with the MSCI Emerging Index that had declined substantially since March 21,” Dass added.

       Sunway University economics professor Dr Yeah Kim Leng said there was a renewed global risk aversion due to the prolonged war between Russia and Ukraine.

       “The rise in the US dollar which is attributed to several factors can also imply a run to safe haven currencies.

       “Investors are discounting a potential escalation of Russia-Ukraine conflict as reports indicated that western countries had been supplying arms to Ukraine and this may result in a prolonged conflict.

       “This will adversely affect the global risk appetite which can eventually affect the equity markets,” Yeah said.

       The perceived safe haven currency in Asean is the Singapore dollar. The ringgit had weakened to RM3.15 per Singapore dollar at press time – the lowest since January 2017.

       Yeah said there are expectations for a stronger US dollar moving forward as investors are anticipating a hike in interest rates on the better-than-expected performance of the US economy.

       “Also, China’s economic outlook is closely linked to Malaysia because China is biggest trading partner of the country,” Yeah said.

       China’s short-term economic outlook appeared likely be affected by its zero-Covid strategy.“The prospects of China’s economy will be impacted as it tries to suppress the number of Covid-19 cases with its strict strategy,” he said.

       Yeah also noted that foreign investors were likely selling down Malaysian assets in anticipation of the Employees Provident Fund (EPF) liquidating its assets following the fourth round of an withdrawal of up to RM10,000 from April 1.

       “This is also a contributing factor as any sell-down in areas such as the bond market can affect the performance of the ringgit,” Yeah said.

       However, he noted that there were factors that could lend some support to the ringgit in the short term including the country’s foreign currency reserves which are inching upwards.

       “This will help to mitigate any severe declines in the currency depreciation,” he said.

       Dass highlighted that the strong crude oil price would provide support the ringgit.

       “This should provide some buffer to keep the ringgit at RM4.30 to a dollar,” Dass said.

       The FBM KLCI stayed near the 1,600 support level gaining 4.57 points or 0.29% to 1,598.32 points.