KUALA LUMPUR (Oct 26): The ringgit continued its decline versus the Singapore dollar on Wednesday (Oct 26), ending the day at a fresh low of 3.3472.

The ringgit pared losses to close at 3.3472, after having fallen to an intraday low of 3.3583. Year-to-date (YTD), the local note has depreciated 8.39% against the Singapore dollar.

In a note on Wednesday (Oct 26), Maybank analysts Saktiandi Supaat, Fiona Lim and Tan Yanxi opined that the ringgit’s retreat versus the Singapore dollar is due to a combination of Malaysia’s upcoming 15th general election (GE15) ushering a fragile sentiment for the local note, at a time when the city-state’s currency is rallied by the Monetary Authority of Singapore (MAS)’s decision to tighten its monetary policy.

“Fragile sentiment for [the] ringgit due to ongoing GE15 uncertainties, as well as [the] recent Monetary Authority of Singapore (MAS)’s decision to re-centre SG$NEER (Singapore dollar nominal effective exchange rate) could mean intermittent support for the Singaporean dollar-ringgit rate on any bearish retracements,” they said.

However, the analysts said while the bullish momentum on the Singapore dollar is intact, they noted that it is waning.

“Support at 3.3076 before 3.2850. Resistance is now seen around 3.35 and then at 3.38,” they added.

On a broader note, DBS Group Research strategists Duncan Tan, Eugene Leow and Philip Wee opined that Singapore dollar rates have risen in line with the US Federal Reserve (US Fed)’s funds’ rate hikes ― of which have been raised 300 basis points (bps) YTD to 3% to 3.25%.

The DBS strategists continued that the Singapore Overnight Rate Average (SORA) and Secured Overnight Financing Rate (SOFR) ― Singapore’s interest rate benchmarks ― have also both moved up by about 300bps, which they said imply a close one-to-one passthrough from US Fed hikes.

“The rise in rates is probably far more than what most people had expected at the start of the year,” they commented.

“This is atypical of previous twin tightening cycles (US Fed and MAS tightening), wherein the passthrough from higher US dollar rates to Singapore dollar rates tends to be much lower,” they added.

Separately, the ringgit closed higher against the greenback for the second consecutive day on Wednesday, as weaker US consumer data lifted hopes that the US Fed would soften its monetary stance of aggressive interest rate hikes, Bernama reported.

At 6pm, the ringgit settled at 4.7120/7165 against the US dollar, from 4.7350/7375 at Tuesday’s closing.

According to Bloomberg’s median forecast, the US Fed is expected to raise its interest rate by 75bps in its Federal Open Market Committee meeting on Nov 1 and 2, followed by another 50bps hike in December for an end-2022 forecast of 4.5%.