On a Friday morning in Kuala Lumpur, the ringgit steadied after a sharp stumble the day before, reminding us how quickly a currency can be pulled between the weight of distant central banks and the hope of peace in a far-off strait. The Federal Reserve's projections, which hint at a possible rate increase later in the year, have made traders wary, while reports of a possible US-Iran agreement have offered a glimmer that oil supplies might flow again and inflation might ease. Nothing is settled yet, as the terms and timing of that peace remain unclear, so the ringgit's modest recovery reads les
Ringgit Opens Higher Against Dollar, Recovering From Sharp Fall on Fed Signals and US-Iran Peace Reports
A modest rebound after a 1.29 per cent fall
Mark
The ringgit opened stronger this morning. How big a move is it?
Mimi
Small. It went from 4.1145/1195 at Thursday's close to 4.1130/1225 at 8 am. But it follows a 1.29 per cent fall the day before, so it reads as a pause after a hard drop.
Mark
What drove Thursday's fall?
Mimi
The Fed's policy decision. The dollar index stayed high at 100.85, and investors focused on projections that the Fed could raise rates by 25 basis points later this year.
Luke
Worth noting that's staff projections, not a decision. And the economist's reading of what the market is thinking is his interpretation, not a measured fact.
Mark
And the Iran news?
Mimi
Reports of a US-Iran peace agreement lifted global equities. If the Strait of Hormuz reopens, oil supply worries ease, crude could fall, and inflation pressure could soften.
Luke
Reports, and a lot of conditionals: could pave the way, potentially lower. The article doesn't give the deal's terms or a reopening date.
Mark
Was the ringgit's fall unusual?
Mimi
Mohd Afzanizam called it rather excessive compared with other regional currencies, and he expects stabilisation today.
Luke
That's a forecast from one economist. Friday's open is a single data point, and we don't yet know whether it holds.
Il Polso
- The ringgit opened firmer at 4.1130 per dollar, clawing back ground after a 1.29 per cent drop the day before.
- Traders are fixated on Fed projections that point toward a possible 25-basis-point rate hike before year's end.
- Reports of a US-Iran peace agreement have lifted risk appetite and raised hopes of reopening the Strait of Hormuz.
- Analysts argue the ringgit's slide looked excessive against regional peers, and that stabilisation may follow.
- The rebound's staying power now hinges on whether the peace reports firm up and how markets read the Fed's next move.
On a Friday morning in Kuala Lumpur, the ringgit steadied after a sharp stumble the day before, reminding us how quickly a currency can be pulled between the weight of distant central banks and the hope of peace in a far-off strait. The Federal Reserve's projections, which hint at a possible rate increase later in the year, have made traders wary, while reports of a possible US-Iran agreement have offered a glimmer that oil supplies might flow again and inflation might ease. Nothing is settled yet, as the terms and timing of that peace remain unclear, so the ringgit's modest recovery reads less like a conclusion than a pause between two uncertain futures.
At 8 am in Kuala Lumpur on Friday, the ringgit was quoted at 4.1130 against the US dollar, slightly stronger than its Thursday close. The gain was small, but it followed a rough session in which the currency had weakened 1.29 per cent, so even a modest recovery carried some relief.
The pressure came from the US Federal Reserve. Dr Mohd Afzanizam Abdul Rashid of Bank Muamalat Malaysia said the US Dollar Index held near 100.85 after the Fed's decision, and that investors were focused less on the statement than on projections suggesting a possible 25-basis-point rate hike later this year. With no forward guidance offered, the market had turned cautious.
A counterweight arrived from abroad. Reports of a US-Iran peace agreement lifted global risk appetite, raising hopes that the Strait of Hormuz could reopen and ease oil supply worries and inflation. Those reports, however, lacked details on terms and timing, so the optimism remains provisional.
Against a basket of major currencies, the ringgit firmed, gaining on the yen, euro and pound. Across the region it advanced against the baht, rupiah and Singapore dollar, while holding steady against the Philippine peso. The coming days will show whether this rebound holds, whether the peace reports take firm shape, and how the market weighs the Fed's projected hike.
At 8 am in Kuala Lumpur on Friday, the ringgit was quoted at 4.1130/1225 against the US dollar, a little stronger than the 4.1145/1195 it had closed at on Thursday. The move was modest, but it came the morning after a rough session: on Thursday the currency had weakened 1.29 per cent against the greenback.
The backdrop was the latest policy decision from the US Federal Reserve. According to Dr Mohd Afzanizam Abdul Rashid, chief economist at Bank Muamalat Malaysia Bhd, the US Dollar Index stayed elevated at 100.85 points after the Federal Open Market Committee announced its decision. Investors, he told Bernama, were concentrating on the Fed's interest rate projections rather than the statement itself.
Those projections, in his reading, are what the market is fixated on. Fed staff estimates suggest the US central bank could raise the federal funds rate by 25 basis points later this year. The FOMC statement offered no forward guidance, and Mohd Afzanizam said that absence pushed the market toward a conservative stance.
A second thread pulled the other way. Global equity markets saw risk appetite improve after reports of a peace agreement between the US and Iran, which could open the way to reopening the Strait of Hormuz. He said that would ease concerns about global oil supply disruptions, potentially bringing lower crude prices and more moderate inflationary pressure worldwide. In his words, it would mean less pressure on central banks to tighten monetary policy. The source describes these as reports, and the deal's terms and timing are not laid out.
On the ringgit's Thursday slide, Mohd Afzanizam was pointed. He said the depreciation appeared rather excessive compared with other regional currencies, and that the ringgit could stabilise on Friday after such a sharp drop.
At the open, the ringgit was firmer against a basket of major currencies. It rose against the Japanese yen to 2.5504/5564 from 2.5588/5620, against the euro to 4.7135/7244 from 4.7222/7280, and against the British pound to 5.4304/4429 from 5.4476/4542.
Among regional currencies, it traded higher across the board except against the Philippine peso, where it was little changed at 6.79/6.81 versus 6.79/6.80 at Thursday's close. It gained against the Thai baht at 12.5435/5801 from 12.5611/5809, against the Indonesian rupiah at 231.1/231.7 from 231.2/231.5, and against the Singapore dollar at 3.1874/1950 from 3.1898/1939.
What to watch next is whether the Friday rebound holds, whether the reported US-Iran agreement firms up enough to reopen the Strait of Hormuz, and how the market reads the Fed's projected 25-basis-point hike.
Citazioni salienti
The ringgit's Thursday depreciation appeared rather excessive compared with other regional currencies, and it could stabilise today.— Dr Mohd Afzanizam Abdul Rashid, Bank Muamalat Malaysia Bhd
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Economy & Finance