The ringgit continued its positive momentum this morning, rising by 0.38% against the US dollar at the opening today, reflecting the positive sentiments following the clarity in Malaysia’s political tussle and the United States Federal Reserve’s signal of a downshift in rate hikes.
At 9am, the local note further strengthened to 4.4760/4810 against the greenback from yesterday’s close of 4.4910/5000.
SPI Asset Management managing director Stephen Innes said there was a huge follow-through on Malaysia’s stock market following the appointment of Datuk Seri Anwar Ibrahim as Malaysia’s 10th Prime Minister, which helped the ringgit to attract foreign investments.
The Pakatan Harapan chairman was sworn in as the prime minister at the Istana Negara yesterday.
“However, a big driver of sentiment going forward will be the softer interest rate hikes indicated by the Federal Open Market Committee’s minutes,” he told Bernama.
Nevertheless, he expects the market to be quiet with the US celebrating the Thanksgiving holiday this weekend, Bernama cited.
Meanwhile, ActivTrades trader Dyogenes Rodrigues Diniz said the decline in the US dollar seems like a natural market correction after the prolonged greenback rally, which saw the US currency hitting multiple highs over the past two years.
“The US dollar registered a cumulative gain of almost 19% against the ringgit during that time.
“Most of the buyers who have benefited from that rise are now taking profit as they are wary of the market’s cyclical behaviour, which is now causing a retracement,” he said.
Meanwhile, the ringgit was traded higher against a basket of major currencies.
The local note climbed versus the Singapore dollar to 3.2522/2561 from 3.2678/2749 at yesterday’s close and gained against the euro to 4.6573/6625 from 4.6792/6886 previously.
It had also appreciated versus the British pound to 5.4169/4229 from 5.4305/4414 and increased vis-a-vis the Japanese yen to 3.2199/2237 from 3.2412/2479 yesterday.
On the stock market, Bursa Malaysia’s key index was slightly easier this morning as profit-taking started to emerge following the strong gains yesterday, while the broader market remained positive.
At 9.06am, the benchmark FTSE Bursa Malaysia KLCI slipped 0.26 of-a-point to 1,501.62 from 1,501.88 yesterday.
The market bellwether opened 0.18 of-a-point lower at 1,501.7.
Dollar Headed For Weekly Loss, Investors Brace For Slower Fed Hikes
The dollar stood close to a three-month low and was on track for a weekly loss on Friday, as the prospect of the Federal Reserve slowing monetary policy tightening as soon as December dominated investors’ minds and kept the mood buoyant.
Trading was thin overnight due to the Thanksgiving holiday in the United States, though most currencies extended their gains against a softer greenback before paring them slightly in early Asia trade, Reuters reported.
Sterling rose more than 0.5 per cent overnight and last stood at $1.21125, close to its over three-month high of $1.2153 hit in the previous session and on track for a nearly 2 per cent weekly gain.
The Japanese yen jumped roughly 0.7 per cent overnight, and last bought 138.60 per dollar.
Minutes from the Fed’s November meeting released earlier this week showed that a “substantial majority” of policymakers agreed it would “likely soon be appropriate” to slow the pace of interest rate hikes – remarks that sent the greenback tumbling.
The Fed’s aggressive interest rate hikes and market expectations of how high the central bank could take them has been a huge driver of the dollar’s 10 per cent surge this year.
“We’ve still got the third successive day of positive risk sentiment… I think that is keeping the U.S. dollar subdued pretty much across the board,” said Ray Attrill, head of FX strategy at National Australia Bank.
Against a basket of currencies, the U.S. dollar index stood at 105.94, testing its three-month trough of 105.30 hit last week. It was headed for a weekly loss of nearly 1 per cent.
Also aiding risk sentiment slightly was a survey that showed that German business morale rose further than expected in November.
European Central Bank (ECB) policymakers fear that inflation may be getting entrenched in the euro zone, accounts of its October meeting showed overnight. However, markets are now expecting a more modest, 50 bp move at the December meeting.
The euro was 0.06 per cent lower at $1.04045, but remained close to $1.0481, its highest level in over four months hit last week.
“We have the euro zone inflation numbers next week, so I think they are going to be a big test of market pricing … were we to get another upside surprise on that, then I think that would bring 75 bp back on the agenda,” said Attrill.
The Aussie fell 0.17 per cent to $0.6753, after rising more than 0.4 per cent overnight. The kiwi slid 0.19 per cent to $0.6252, but that was not far off its three-month peak hit in the previous session.
The New Zealand dollar was headed for a weekly gain of more than 1.5 per cent, aided by the Reserve Bank of New Zealand’s 75 bp rate hike earlier in the week and its hawkish rate outlook.
Over in China, markets were also closely watching an impending cut in banks’ reserve requirement ratio (RRR).
China will use timely cuts in banks’ RRR, alongside other monetary policy tools, to keep liquidity reasonably ample, state media quoted a cabinet meeting as saying.
“We believe it’s likely the PBoC (People’s Bank of China) may cut RRR by 25 bp for most banks in the next couple of weeks (or even days),” said analysts at Nomura.
“That being said, the RRR is likely to only have a limited positive impact, as we believe the real hurdle for the economy lies in local officials’ more zealous implementation of Covid restrictions rather than insufficient loanable funds.”
The Chinese offshore yuan was last 0.1 per cent lower at 7.1759 per dollar.
