KUALA LUMPUR, July 14 (Xinhua) -- Malaysian Ringgit weakened past 4.20 against the U.S. dollars on Wednesday for the first time since August 2020, as U.S. Federal Reserve (Fed) signals an earlier tapering, and rising domestic COVID-19 cases drag sentiment.

At 5:00 p.m. local time, the Ringgit depreciated to 4.2015 against the U.S. dollar, from Tuesday's closing of 4.1920.

OANDA Asia Pacific's senior market analyst Jeffrey Halley said, ASEAN currencies in general, remain under pressure as the delta-variant COVID-19 wave continues to wreak havoc with the region's recovery plans.

"As one of the worst affected, and with no apparent concrete progress despite movement control order, Malaysian markets are suffering a COVID discount. Into that mix is the political disarray brewing in the country with a shaky government and potentially new elections just when strong leadership was required," he told Xinhua Wednesday.

He also said Tuesday night's huge U.S. inflation print has further complicated the economic backdrop for Malaysia and ASEAN as fears rise that the Fed chairman Jerome Powell may signal an earlier tapering schedule in congressional testimony.

"With rates at record lows in ASEAN and Malaysia with no room to hike at this stage, a divergence in the potential trajectory of U.S. and Malaysian monetary policy is weighing on the currency," he added.

He expects the Ringgit to remain under pressure with USD/MYR potentially rising to 4.30 by early next week if Powell is perceived as even slightly hawkish.

SPI Asset Management's managing partner Stephen Innes also told Xinhua that any hawkish intimations from Powell at the upcoming speech to the U.S. Congress could be latched onto by a U.S. dollar bull and weaken the Ringgit further.

He expects the Ringgit to slip to 4.23 against the U.S. dollars amid hawkish Fed.

Malaysia's domestic issues such as lockdown extension, fiscal slippage, and political uncertainty, are expected to add pressure on the local currency too, he added.

"I'm fairly bearish in the short term but will turn more constructive on the ringgit later in the year when vaccinations inoculate a larger percentage of the population and expect the ringgit to trade back to 4.15 as regional economies open up," he said.