KINIBIZ “Desperation is like stealing from the Mafia: you stand a good chance of attracting the wrong attention.” - Douglas Horton

A special trait that all Tigers have is the ability to sniff out desperation kilometres away from the source, which is usually an unfit kijang struggling to get away or a human being desperately climbing a tree to avoid being eaten by yours truly and the rest of her kind.

But the desperation of the worst kind is when it comes from panicking investors - in this case, those heedlessly fleeing from the weak ringgit. Tiger thinks in some ways they are unjustified and believes that there could be a reprieve in sight for the ringgit, if a confluence of factors take place sooner rather than later.

Economists and analysts have suggested that the fate of the ringgit appears tied to the decision of the US Federal Reserve in relation to an interest rate hike. This means that if a hike were to occur, it would further strengthen the already-strong US dollar and thus weaken emerging market currencies, including the ringgit.

However, Reuters reported on Aug 21 that the minutes from the July 28-29 meeting of the Federal Open Market Committee showed just one panel member as ready to raise rates. “Others acknowledged that improving labour markets and other necessary economic conditions were falling into place for the first US rate hike in nearly a decade, according to the minutes,” the report said.

The report also cited experts saying that the minutes do not give a clear view of whether the Fed will hike rates in September. Given that US inflation is low (the latest rate is 0.2 percent) and that growth is returning to the country (its second quarter gross domestic product expanded 2.3 percent over the previous quarter), the Fed may not want to risk US exports by allowing the US dollar to strengthen further.

If the Fed does postpone a rate hike, this will allow the US dollar to drop and, as a result, allow emerging market currencies like the ringgit to strengthen. However, the market has already priced in a rate hike, thus leading to the continued weakening of the ringgit. Until more clarity comes from the Fed, Tiger thinks the ringgit will continue its slide.

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This article was written by G Sharmila.