As the 2019 novel coronavirus continues to grip global fears, the ringgit is expected to test the psychological level of 4.10 next week, with a downtrend momentum in the offing.

FXTM market analyst Han Tan said during the holiday-shortened week due to the Lunar New Year, investors had to deal with troubling headlines surrounding the coronavirus outbreak, causing a risk sentiment.

"With the risk aversion erasing the ringgit’s year-to-date gain against the greenback, investors would need clear signs that the coronavirus outbreak is stabilising before risk assets can stage a meaningful rebound," he told Bernama.

The ringgit value depreciated 1.93 percent in the last three months due to various global concerns, including the US-China trade tension, US-Tehran geopolitical tension, and of late, the coronavirus outbreak.

Tan added that should fear over the outbreak threaten a prolonged pullback in global manufacturing activity due to an expected slump in demand, that could dampen the 2020 outlook for the worldwide economy.

On Friday morning, the World Health Organisation declared the virus as a global health emergency, triggering economic concerns globally, with markets witnessing global stocks taking a cue from it.

For the week ahead, Tan said as long as risk aversion reigns, it may prompt the ringgit to have a sustained presence above the 4.10 level against the US dollar.

"However, the ringgit weakness could be mitigated if we see positive surprises in the domestic economic prints due over the coming week, including December’s industrial production and external trade data.

"Should risk-off sentiment fades away, the ringgit/US dollar immediate support should arrive around the 4.05 region," he said.

On a Friday to Friday basis, the ringgit was traded lower against a basket of currencies.

It declined slightly to 2.9988/3.0032 from 2.9954/9980 against the Singapore dollar and depreciated vis-a-vis the Japanese yen to 3.7581/7628 from 3.7323/7345 last Friday.

The local currency also shed against the euro to 4.5167/5227 compared with 4.4791/2821 and slid slightly against the British pound to 5.3723/3792 from 5.3221/3263 previously.

- Bernama