The ringgit opened flat against the US dollar this morning as investors opted for a wait-and-see attitude as the rate hike expectation has been factored in, a dealer said.
At 9am, the local currency stood at 4.7425/7465, unchanged against the greenback from yesterday’s close of 4.7425/7460.
Hong Leong Investment Bank (HLIB) Research opined that the continuous Fed Funds Rate (FFR)-Overnight Policy Rate (OPR) spread widening could lead to continued ringgit weakness.
It said a widening of FFR-OPR spread, which rose from +63 basis points (bps) to +113 bps, is broadly negative for the FBM KLCI (-58 per cent correlation) and possible further weakness in ringgit.
“As such, we expect the US dollar versus ringgit to average at 4.44 in 2022 and 4.80 at year-end,” Bernama cited HLIB Research saying in a note on Friday.
Bank Negara Malaysia (BNM) raised the OPR by 25 bps to 2.75 per cent, the fourth consecutive hike since May this year, as the central bank’s Monetary Policy Committee decided to further adjust the degree of monetary accommodation.
Previously, the US Federal Reserve (Fed) announced another large 75 bps hike on Wednesday, pushing the FFR higher to a range of 3.75 to four per cent.
ActivTrades trader Dyogenes Rodrigues Diniz said the US dollar reached its highest level since January 1998 but shortly after that level was reached, the ringgit moved higher on the back of BNM’s decision.
Diniz said BNM has maintained a slow but steady pace of interest rate hikes over the past few meetings to contain inflation.
“The predictability of the interest rate increase has allowed the US dollar against ringgit to rise over the last few months, as the hike pace of the US Fed has been much more aggressive than the interest rate increases announced for the ringgit,” he said.
The ringgit ended at a fresh all-time low against the US dollar yesterday due to weak sentiment amid the strengthening greenback.
Today, the ringgit was traded mixed against a basket of major currencies.
The local note appreciated against the British pound to 5.3040/3085 from 5.3372/3411 at yesterday’s close and strengthened against the euro to 4.6249/6288 from 4.6258/6292 previously.
However, it depreciated against the Singapore dollar to 3.3363/3395 from 3.3353/3383 and decreased vis-a-vis the Japanese yen to 3.2001/2030 from 3.1992/2018 yesterday.
Meanwhile, the US dollar surged in late trading on Thursday, after the Federal Reserve approved another big rate hike and signalled more hikes to come.
The dollar index, which measures the greenback against six major peers, increased 1.4 per cent to 112.9260.
In late New York trading, the euro fell to US$0.9755 from US$0.9888 in the previous session, and the British pound fell to US$1.1165 from US$1.1476 in the previous session.
The US dollar bought 148.24 Japanese yen, higher than 146.96 Japanese yen of the previous session, reported Xinhua.
The US dollar was up to 1.0124 Swiss francs from 0.9983 Swiss francs, and it was up to 1.3725 Canadian dollars from 1.3648 Canadian dollars. The US dollar increased to 11.1775 Swedish Kronor from 11.0251 Swedish Kronor.
The Fed on Wednesday raised the benchmark rates by 75 basis points for the fourth consecutive meeting, setting the federal funds target range between 3.75 per cent and 4 per cent.
In his press conference shortly after the rate decision, Fed Chair Jerome Powell said it was very premature to think about pausing rate hikes and suggested that the ultimate level of rates may be higher than initially thought.
In Chicago, gold futures on the COMEX division of the New York Mercantile Exchange fell on Thursday, as the US dollar index and US treasury yields strengthened.
The most active gold contract for December delivery fell US$19.1, or 1.16 per cent, to close at US$1,630.9 per ounce.
his is the lowest finish for a most-active gold contract since early April 2020.
Powell’s remarks about higher interest rates boosted the US dollar index and US treasury yields, dampening gold.
Silver for December delivery fell 16.4 cents, or 0.84 per cent, to close at US$19.43 per ounce. Platinum for January delivery fell US$26.8, or 2.82 per cent, to close at US$924.1 per ounce.
