The ringgit rebounded on Friday against the US dollar as investors shrugged off US higher-than-expected consumer price index (CPI) data.
At 9am, the ringgit appreciated to 4.6405/6455 versus the greenback from Thursday’s close of 4.6425/6455.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the US headline CPI came in slightly higher in December at 3.4% against consensus estimate of 3.2%, while core CPI was up at 3.9% against consensus estimate of 3.8%.
However, the bond market continues to exhibit a decline in yields, suggesting that market participants continue to expect a rate cut.
Two-year US Treasury yields were down by six basis points (bps) to 4.25% while 10-year Treasury yields were 11bps lower at 3.97%.
Similarly, the US Dollar Index (DXY) declined 0.04% to 102.325 points.
“On further scrutiny, higher headline CPI was largely supported by a rise in transport sub-index due to a sustained rise in motor vehicle insurance, which has been edging up 20.3% during December as the insurance premium has gone up following higher labour cost, shortage of mechanics and rising auto parts prices.
“So, the higher inflation was not so much due to demand, and the disinflationary trend is still intact. This could be the reason why the markets are not convinced that the Fed will change their tact and the rate cut thesis still holds,” he told Bernama.
On that note, he expects the ringgit to appreciate against the US dollar on Friday.
“It’s a question of timing, whether rate cuts are going to be in March or later,” he added.
Meanwhile, the ringgit was traded lower against a basket of major currencies.
It weakened versus the euro to 5.0929/0984 from 5.0896/0929 on Thursday, depreciated vis-a-vis the British pound to 5.9250/9314 from 5.9141/9179 and decreased against the Japanese yen to 3.1944/1981 from 3.1896/1919.
The ringgit also traded higher against Asean currencies.
It strengthened against the Singapore dollar to 3.4878/4918 from 3.4901/4926 at Thursday’s close and rose vis-à-vis the Philippine peso to 8.28/8.29 from 8.29/8.30.
The local currency was slightly better versus the Indonesian rupiah at 298.4/298.8 from 298.5/298.8 and gained against the Thai baht to 13.2287/2505 from 13.2408/2551 previously.
