KUALA LUMPUR (April 20): The ringgit on Wednesday (April 20) weakened further against the US dollar, depreciating below RM4.28 — the lowest level in 22 months — although crude oil prices have been staying at above US$100 per barrel.

The local currency appears to have diverged from the crude oil price trend in recent months. The ringgit did not appreciate against the greenback when the crude oil prices climbed further as it usually did in the past.

At 6pm, the local note eased further to 4.2800/2830 against the US dollar from 4.2505/2515 at Monday’s close.

Meanwhile, the ringgit also traded mostly lower against a basket of major currencies.

It weakened against the Singapore dollar to 3.1371/1398 from 3.1228/1240 on Monday but the ringgit was stronger against the Japanese yen at 3.3432/3458 from 3.3569/3579 previously.

The local currency was also weaker against the British pound at 5.5781/5820 from 5.5303/5316 on Monday and lower against the euro at 4.6468/6501 from 4.5867/5878.

The US dollar is gaining strength amid expectation that the US Federal Reserve will accelerate its interest hike to tame inflation.

The US Dollar Index — which measures the value of the US dollar against a basket of currencies — surged above 100 for the first time in two years in anticipation that the US Federal Reserve will accelerate its interest rate hikes to tame inflation.

The US Dollar Index was at 100.32 as the greenback hit a 20-year high against the Japanese yen and tested a two-year peak on the euro.

However, DBS Group Research noted the US Fed does not dominate the gyrations in the global rates space.

“Attention has now shifted to the European Central Bank (ECB) and perhaps greater recognition that fiscal policies might stay loose in the eurozone for some time. If the ECB is serious about containing inflation, implied real rates have to climb.

“Aside from the US Fed, only the ECB is able to exert this much influence on global rates. In any case, EUR rates matter and could contribute to the peak duration fear that we expect to be hit in 2Q,” said DBS Group strategists Eugene Leow and Philip Wee in a Monday note.

With the International Monetary Fund (IMF) readjusting its global growth projection to below 4%, most emerging Asian currencies depreciated and remain under pressure, said the research firm, which anticipates the ringgit to drop to RM4.30 against the greenback by the end of third quarter.

“In emerging Asia, the Chinese Yuan depreciated 0.4% to 6.3935 per US dollar, outside its month-long range between 6.36 and 6.38.

“The IMF affirmed expectations for China to miss its official growth target of 5.5% this year. Its latest growth forecast for China was 4.4%, lower than the 4.8% predicted by our economists,” said the strategists.