The ringgit opened lower against the US dollar today, extending its downtrend from last Friday as concerns over further interest rate increases by the United States Federal Reserve (Fed) weighed on sentiments, analysts said.
At 9am, the ringgit eased to 4.3350/3395 against the greenback from Friday’s close of 4.3320/3350.
According to SPI Asset Management managing director Stephen Innes, with the Fed’s tone turning hawkish, a higher US Treasury yield environment is bad for the ringgit as it makes the Malaysian Government Securities (MGS) less attractive.
“Also, Asian markets are very defensive due to sluggish property sales in China, while more local investors believe that this year’s household consumption recovery could be slower than expected, given the scarring effects of property deleveraging,” he told Bernama.
Meanwhile, on the release of the US Consumer Price Index (CPI) January report tomorrow, he said a strong CPI reading could increase demand for the US dollar.
In the meantime, the ringgit traded higher against a basket of major currencies.
The local note ticked up against the Singapore dollar to 3.2579/2618 from Friday’s close of 3.2635/2663, and strengthened versus the euro to 4.6267/6315 from 4.6391/6424 previously.
It had also improved vis-à-vis the Japanese yen to 3.2916/2952 from 3.3089/3114 on Friday (February 10), and strengthened against the British pound to 5.2232/2287 from 5.2404/2440 previously.
US dollar hangs near five-week high as inflation data looms; Yen slips
The dollar hovered near a five-week high against major peers today on rising bets for prolonged Federal Reserve policy tightening ahead of a crucial consumer price report the following day.
The yen slipped with the government set to nominate a candidate who backs the current policy settings as the new Bank of Japan governor tomorrow.
The risk-sensitive Australian and New Zealand dollars eased with Asian equities on worries that higher US rates will choke growth. Sterling also retreated.
“The dollar has been well supported since the much-stronger-than-expected US jobs data earlier this month, and Fed comments have leaned more to the hawkish side, but of course the focus is tomorrow’s CPI,” said Shinichiro Kadota, senior FX strategist at Barclays in Tokyo.
“I think the market is more worried about upside risks to inflation, rather than downside risks.”
Ahead of tomorrow’s CPI report, revisions to the previous data set showed consumer prices rose in December instead of falling as previously estimated.
Separately, the University of Michigan surveys showed a one-year inflation outlook of 4.2 per cent, higher than the final number in January. Fed Chair Jerome Powell has cited the Michigan survey as one of the indicators the US central bank tracks.
The dollar index — which measures the greenback against six counterparts including the yen, euro and sterling — added 0.068 per cent to 103.65, keeping close to last Tuesday’s high of 103.96, the strongest level since January 6, Reuters cited.
The US currency gained 0.18 per cent to ¥131.63, although well within the range of the past week of 129.80 to 132.90.
Sources said on Friday that former BOJ board member Kazuo Ueda is set to become the next governor. In an interview the same day, he said it was appropriate for the BOJ to maintain its current ultra-easy policy.
The euro eased 0.06 per cent to US$1.0669, while sterling was last trading at US$1.2044, down 0.12 per cent on the day. The Aussie fell 0.13 per cent to US$0.6910, and New Zealand’s kiwi lost 0.08 per cent to US$0.6306.
