On a Thursday morning in Kuala Lumpur, the ringgit edged lower against the US dollar even as it found firmer footing against most of its other major counterparts. The small slip reflects a familiar tug in global money: when the American economy shows stronger business activity and policymakers hint at further rate increases, the dollar tends to draw capital toward itself, and smaller currencies must adjust. Malaysia's currency is thus caught between its own steadiness and the larger gravity of Washington's monetary choices. Its path for the day, as analysts see it, will be read from the signal
Ringgit Opens Higher Against Major Currencies but Slips Against the US Dollar
A small slip that ran against the grain of the rest of the opening
Mark
The ringgit rose against the euro, pound and yen but fell against the dollar. How does that happen at once?
Mimi
The dollar was the one moving. A stronger US data point and talk of more Fed hikes pushed the dollar index up 0.49 per cent, so the ringgit lost a little to it while edging ahead of the others.
Mark
What was the data?
Mimi
The US Composite PMI Output Index hit 58.4 in September, the highest in 62 months. Treasury yields jumped too, to 4.85 per cent on two-year and 5.11 per cent on 10-year paper.
Luke
Worth noting the Fed point is one economist's interpretation. Mohd Afzanizam said Governor Barr's remarks indicated a likely resumption of hikes. We aren't given Barr's actual words.
Mimi
Fair. The PMI and yield figures are reported numbers, but the reading of Fed intent is his.
Mark
And the forecast of RM4.08 to RM4.10?
Luke
That's a single analyst's expectation for one day, not a confirmed outcome. The move itself was small, from 4.0780 to 4.0835 at the open.
Mimi
Right, and the ringgit's gains elsewhere were also modest, a few hundredths against the euro, for example.
Mark
So what decides the rest of the day?
Luke
The source doesn't say beyond Fed signals. Anything more would be guessing.
Il Polso
- The ringgit opened at 4.0835 against the dollar, slipping from Wednesday's 4.0780 close, even as it gained against the euro, pound and yen.
- A stronger US economy, with business activity hitting a 62-month high, has pushed the dollar index up nearly half a percent.
- Treasury yields jumped sharply, with the two-year rising 14 basis points and the ten-year 15, signalling bond markets expect tighter policy.
- Traders are watching for Federal Reserve signals on further rate hikes, with analysts expecting the ringgit to hold between RM4.08 and RM4.10 today.
On a Thursday morning in Kuala Lumpur, the ringgit edged lower against the US dollar even as it found firmer footing against most of its other major counterparts. The small slip reflects a familiar tug in global money: when the American economy shows stronger business activity and policymakers hint at further rate increases, the dollar tends to draw capital toward itself, and smaller currencies must adjust. Malaysia's currency is thus caught between its own steadiness and the larger gravity of Washington's monetary choices. Its path for the day, as analysts see it, will be read from the signals the Federal Reserve sends next.
At eight in the morning in Kuala Lumpur, the ringgit stood at 4.0835 against the US dollar, a little weaker than Wednesday's close. It was a modest slip, but it cut against the rest of the opening, when the local currency gained on most of its other major rivals.
Dr Mohd Afzanizam Abdul Rashid, chief economist at Bank Muamalat Malaysia, told Bernama that the dollar was the culprit. Expectations of further rate hikes by the US Federal Reserve this year had lifted the US Dollar Index by 0.49 per cent to 101.096, backed by firmer American business sentiment. He pointed to a September composite PMI reading of 58.4, the highest in 62 months, and to remarks from Fed Governor Michael Barr that he read as a sign the Fed may resume tightening.
Bond markets agreed. The two-year Treasury yield jumped 14 basis points to 4.85 per cent, and the ten-year rose 15 basis points to 5.11 per cent. Against that backdrop, Mohd Afzanizam expected the ringgit to trade between RM4.08 and RM4.10 through the day.
Elsewhere the picture was brighter. The ringgit firmed against the euro, the pound and the yen, and traded mixed among ASEAN peers, strengthening against the Singapore dollar and Thai baht while easing against the rupiah and little changed against the peso. For the rest of the day, its direction against the dollar looks tied to what the Fed says next.
At 8 am on Thursday in Kuala Lumpur, the ringgit stood at 4.0835/0910 against the US dollar, down from Wednesday's close of 4.0780/0825. It was a small slip, but it ran against the grain of the rest of the opening, when the local currency gained on most of the other major currencies it was quoted against.
The reason, according to Dr Mohd Afzanizam Abdul Rashid, chief economist at Bank Muamalat Malaysia Bhd, was a stronger dollar. He told Bernama that expectations of further interest rate hikes by the US Federal Reserve this year had supported the US Dollar Index, which rose 0.49 per cent to 101.096. The backdrop, he said, was firmer business sentiment in the United States.
He pointed to two developments. The first was the US Composite Purchasing Managers' Index Output Index, which climbed to 58.4 points in September, its highest level in 62 months. The second was a set of remarks by Fed Governor Michael Barr, which in Mohd Afzanizam's reading indicated that the Fed is likely to resume its rate hike cycle this year.
Bond markets moved in the same direction. The two-year US Treasury yield jumped 14 basis points to 4.85 per cent, and the 10-year yield rose 15 basis points to 5.11 per cent. Given all that, Mohd Afzanizam said he expected the ringgit to trade between RM4.08 and RM4.10 against the dollar through the day.
Against other major currencies the picture was brighter for the ringgit. It strengthened against the euro to 4.6482/6568 from 4.6522/6573 at Wednesday's close, and advanced against the British pound to 5.4061/4161 from 5.4156/4216. It also gained on the Japanese yen, moving to 2.5802/5852 from 2.5836/5868.
Among its ASEAN peers, the ringgit traded mixed. It appreciated against the Singapore dollar to 3.1897/1958 from 3.1909/1947, and strengthened against the Thai baht to 12.2078/2364 from 12.2599/2782. It eased against the Indonesian rupiah, moving to 229.1/229.6 from 228.8/229.2, and was little changed against the Philippine peso at 6.52/6.53 versus 6.51/6.52 previously.
For the rest of the day, the direction of the ringgit against the dollar looks tied to what the Fed signals about further rate hikes, with the RM4.08 to RM4.10 range as the analyst's expected band.
Citazioni salienti
The Fed is likely to resume its interest rate hike cycle this year, as indicated by remarks from Governor Michael Barr (paraphrased).— Dr Mohd Afzanizam Abdul Rashid, Bank Muamalat Malaysia Bhd chief economist
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Economy & Finance