KUALA LUMPUR: The ringgit continued to open lower versus the US dollar today on subdued demand despite the US Federal Reserve (Fed) leaving its benchmark rate at 5.25 per cent during the Federal Open Market Committee meeting last night.
At 9.02 am, the local note was traded at 4.6210/6245 against the greenback compared with 4.6195/6235 at Wednesday’s close.
ActivTrades trader Dyogenes Rodrigues Diniz said with the small differential between the US rate and Malaysia’s key interest rate of 3.0 per cent, the US dollar could lose its attractiveness in the short and medium term, opening space for a possible appreciation of the ringgit over the next few months.
He said the Fed’s latest move also marked an important change in its stance, having spent the last 10 meetings gradually raising interest rates.
“This also raises the chance that the Fed might continue to lower interest rates in the upcoming meetings, although that still seems unlikely for the time being.
“From a technical point of view, if the ringgit-US dollar (rate) manages to break below 4.5980, it could drop as low as 4.5250 in a few days,” he told Bernama.
Meanwhile, Bank Muamalat Malaysia Bhd chief economist and social finance head Dr Mohd Afzanizam Abdul Rashid said although the Fed left the benchmark rate at 5.25 per cent, it, however, continued to remain hawkish and leaned towards lowering the inflation rate towards its target level of 2.0 per cent.
This has been reflected in the latest forecast that the Federal Funds Rate would end the year at 5.6 per cent from the previous estimates of 5.1 per cent in March this year.
In that sense, he said, another 25 to 50-basis point hike in the subsequent meetings during the second half of 2023 was quite likely.
“Moving ahead, the focus would be on European Central Bank whereby the consensus is expecting another 25-basis point hike in its policy rate when the Governing Council meets today.
“We expect the ringgit to gain some ground against the US dollar, but against the euro, the ringgit is easing,” Mohd Afzanizam told Bernama.
Meanwhile, the ringgit traded mostly lower against a basket of major currencies.
It advanced against the Japanese yen to 3.2899/2926 from 3.3015/3046 at Wednesday’s close but slipped versus the British pound to 5.8497/8542 from 5.8423/8473 yesterday and fell vis-a-vis the euro to 5.0078/0116 from 4.9918/9962.
However, the local note traded mostly higher against other Asean currencies.
The ringgit was slightly lower versus the Indonesian rupiah at 309.9/310.3 compared with 309.8/310.3 at yesterday’s close.
However, the local currency appreciated against the Thai baht to 13.2864/3022 from Wednesday’s 13.3192/3380, rose vis-a-vis the Singapore dollar to 3.4429/4460 from 3.4433/4465 yesterday and improved versus the Philippine peso to 8.25/8.27 from 8.26/8.27 previously.
US dollar loses
The US dollar weakened on Wednesday as the Federal Reserve held its benchmark rate unchanged at 5.00-5.25 per cent at the end of its June meeting, in line with expectations, reported Xinhua.
The dollar index, which measures the greenback against six major peers, decreased 0.07 per cent to 103.2667 in late trading, after hitting four-week lows earlier in the session.
“Holding the target range steady at this meeting allows the committee to assess additional information and its implication for monetary policy,” the Federal Open Market Committee said in a statement.
The Fed also projected the economy to grow one per cent this year, higher than the estimate of 0.4 per cent in March. GDP growth estimates for 2024 were lowered by 0.1 percentage points to 1.1 per cent.
In the opening comments at his news conference, Fed Chair Powell said that “nearly all” policymakers “expect that it will be appropriate to raise interest rates somewhat further by the end of the year.”
New forecasts released alongside the decision showed that most Fed officials expect federal funds rates to rise to 5.6 per cent, suggesting two more hikes are on the horizon by December.
After the announcement of the decision, the US dollar unexpectedly surged, recovering most of the losses it had experienced prior to the decision’s release.
“The slowdown of US inflation in May to 4 per cent has provided the Federal Reserve with the confidence to pause rate hikes at the 5-5.25 per cent range following ten straight rate increases since March last year,” said Srijan Katyal, global head of strategy and trading services at international brokerage firm ADSS.
In late New York trading, the euro rose to US$1.0836 from US$1.0790 in the previous session, and the British pound was up to US$1.2668 from US$1.2602 in the previous session.
The US dollar bought 139.6670 Japanese yen, lower than 140.2840 Japanese yen of the previous session. The US dollar decreased to 0.8992 Swiss franc from 0.9059 Swiss franc, and it increased to 1.3313 Canadian dollars from 1.3311 Canadian dollars. The US dollar increased to 10.7148 Swedish Krona from 10.7138 Swedish Krona.
Foreign exchange rates
Following are the opening Malaysian foreign exchange for major currencies on June 15:
1 USD 4.6210/6245
100 yen 3.2899/2926
1 pound 5.8497/8542
1 euro 5.0078/0116
1 SGD 3.4429/4460
100 baht 13.2864/3022
1 mln rupiah 309.9/310.3
100 pesos 8.25/8.27
Short-term rates
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 RM47.59 billion in the conventional system and RM33.39 billion in Islamic funds.
Today, the central bank will conduct two RM1 billion conventional money market tenders, for seven days and 15 days, respectively, as well as two commodity Murabahah programme tenders comprising RM1 billion each for seven days and 15 days.
It will also conduct two reverse repo of RM2.71 billion for 32 days and RM1.11 billion for 92 days.
The central bank 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 a conventional overnight tender of up to RM48.4 billion and a Murabahah overnight tender of up to RM30.4 billion.
Gold price
The physical price of gold as at 9.30 am stood at RM278.29 per gramme, down RM1.91 from RM280.20 at 5 pm yesterday.
Gold futures on the COMEX division of the New York Mercantile Exchange rose on Wednesday as US inflation pressure eases, reported Xinhua.
The most active gold contract for August delivery rose US$10.30, or 0.53 per cent, to close at US$1,968.90 per ounce.
The US Labour Department reported Wednesday that the US producer price index (PPI) dropped 0.3 per cent in May after inching up by 0.2 per cent in April, another sign that inflationary pressures continue to ease in the face of repeated interest rate hikes by the Federal Reserve. PPI rose 1.1 per cent in May from last year, the smallest year-over-year gain since December 2020.
Shortly after gold’s floor trading was closed, the Federal Open Market Committee meeting concluded, and the Federal Reserve left key US interest rates unchanged in June at 5.00-5.25 per cent, but lifted Fed funds target to 5.6 per cent from 5.1 per cent, which implies two more 25-basis-point interest rate hikes this year.
Gold fell in electronic trading after the Federal Reserve’s announcement.
Silver for July delivery rose 28.30 cents, or 1.19 per cent, to close at US$24.105 per ounce. Platinum for July delivery fell US$1.90, or 0.19 per cent, to close at US$980 dollars per ounce. – BERNAMA
