KUALA LUMPUR: The ringgit extended its positive run against the US dollar today as the greenback weakened due to the lower-than-expected United States Consumer Price Index (US CPI) data in June 2023.
At 9 am, the local note climbed 310 percentage in points (pips) to 4.6190/6230 against the greenback compared with 4.6500/6535 at Wednesday’s close.
According to news report, the US CPI declined to three per cent in June from four per cent in May 2023, slightly below the market expectation of 3.1 per cent.
ActivTrades trader Dyogenes Rodrigues Diniz said the CPI announcement showed that the monetary policy adopted by the Federal Reserve (Fed) has had the desired effect and investors were already beginning to wonder when the Fed would start lowering interest rates.
“From a technical point of view, the USD/MYR could drop to the region of 4.5750 and 4.5250 over the next few weeks,” he said.
Meanwhile, Bank Muamalat Malaysia Bhd chief economist and social finance head Dr Mohd Afzanizam Abdul Rashid the US Dollar Index (DXY) continued to decline to 100.568 points while the 10-year US Treasury yield fell about 10 basis points to 3.86 per cent.
“Against such a backdrop, the ringgit should regain more ground as the Fed might shift its monetary policy stance at some point in the future,” he explained.
Meanwhile, the ringgit traded mostly lower against a basket of major currencies.
It slipped against the Japanese yen to 3.3345/3377 from 3.3300/3327 at Wednesday’s close and weakened vis-a-vis the euro to 5.1446/1491 from 5.1262/1300, but rose against the British pound to 6.0005/6.0057 from 6.0120/0165 yesterday.
The local note also traded mixed against other Asean currencies.
The ringgit firmed versus the Singapore dollar to 3.4727/4762 from Wednesday’s close of 3.4753/4782 and gained against the Indonesian rupiah to 306.3/306.8 from 308.4/308.8 previously.
However, the local note depreciated against the Thai baht to 13.3243/3420 from 13.3173/3338 and was unchanged against the Philippine peso at 8.46/8.47.
US dollar falls to one-year low
The US dollar suffered substantial losses on Wednesday after the US consumer price index (CPI) for June showed the rate of inflation slowing to the lowest level since 2021, reported Xinhua.
The dollar index, which measures the greenback against six major peers, decreased 1.19 per cent to 100.5220 in late trading, hitting its lowest in more than a year, which is also its largest daily percentage loss since early February.
The US annual inflation slowed to 3 per cent last month, the smallest annual pace since March 2021, according to the latest CPI released Wednesday by the US Bureau of Labour Statistics. Core inflation, which excludes volatile food and energy prices, fell to 4.8 percent annually, below a consensus projection of 5 per cent.
“The dollar selling off across the board after today’s soft US inflation report intensified bets that the Federal Reserve’s rate hike cycle may soon be nearing an end,” said Matthew Ryan, head of market strategy at global financial services firm Ebury.
However, Federal Reserve Bank of Richmond President Thomas Barkin said backing off too soon on rates would require the Fed to do even more in the future since the US inflation rate is still too high.
Neel Kashkari, Minneapolis Federal Reserve president, also said that banks need to be ready for entrenched inflation.
In late New York trading, the euro increased to US$1.1137 from US$1.0999 in the previous session, and the British pound was up to US$1.2991 from US$1.2928 in the previous session.
The US dollar decreased to 1.3192 Canadian dollars from 1.3239 Canadian dollars in late New York trading, after the Bank of Canada raised its key interest by another 25 basis points to 5 per cent on Wednesday and resumed its rate hikes in June.
The US dollar bought 138.3180 Japanese yen, lower than 140.4630 Japanese yen of the previous session.
The greenback also hit its lowest against the Swiss franc since early 2015, as it decreased to 0.8670 Swiss francs from 0.8799 Swiss francs on Wednesday, and down to 10.3800 Swedish Krona from 10.6696 Swedish Krona.
Short-term rates to remain stable
Short-term rates are expected to remain stable today on Bank Negara Malaysia’s (BNM) operations to absorb surplus liquidity from the financial system.
Liquidity is estimated at RM50.38 billion in the conventional system and RM24.10 billion in Islamic funds.
Today, the central bank will call for two reverse repo tenders, namely a RM1.5 billion tender for 32 days and a RM500 million tender for 92 days.
Additionally, BNM will conduct a RM2 billion Bank Negara Interbank Bills Islamic (BNIBI) tender for 31 days.
It also announced the availability of reverse repo, sale and buy-back agreements as well as collateralised commodity Murabahah facilities for tenors of one to three months.
At 4 pm, BNM will conduct up to RM52.0 billion conventional overnight tender and RM27.4 billion Murabahah overnight tender.
Foreign exchange rates
Following are the opening Malaysian foreign exchange for major currencies today:
1 USD 4.6190/6230
100 yen 3.3345/3377
1 pound 6.0005/6.0057
1 euro 5.1446/1491
1 SGD 3.4727/4762
100 baht 13.3243/3420
1 mln rupiah 306.3/306.8
100 pesos 8.46/8.47
Gold down
The physical price of gold as at 9.30 am stood at RM281.18 per gramme, up RM1.35 from RM279.83 at 5 pm yesterday. – BERNAMA
