KUALA LUMPUR, Aug 2 — The ringgit opens higher against the United States dollar today, continuing its 10-day rally as investors anticipate possible Federal Reserve (Fed) rate cuts next month.
At 8am, the ringgit marginally increased by 30 basis points to 4.5645/5725 against the greenback from yesterday’s 4.5675/5710 close.
Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said the United States Institute for Supply Management (ISM) index for the manufacturing sector fell to 46.8 points in July, lower than the consensus estimate of 48.8 points.
He said respondents to the ISM survey suggested consumer demands are slowing, and some businesses are focusing on reducing their inventories.
“Claims for jobless insurance in the United States were also rising to 249,000 last week from 235,000 previously, suggesting that the labour market is weakening.
“These (indicators) seem to support the view that the Fed would cut the rates in September as it needs to ensure the economy would be able to achieve a soft landing in growth after maintaining a restrictive monetary policy stance for quite some time,” he told Bernama.
Afzanizam also said the ringgit looks constructive versus the United States dollar as the rate differential will likely narrow between the federal funds rate and the overnight policy rate.
“After experiencing a sharp appreciation against the greenback, we still feel the ringgit is undervalued and, therefore, the upside potential is still very much visible.
“However, the temptation among the traders to lock in gains would result in some correction in the ringgit in the immediate terms,” he said.
On that note, the ringgit would linger around 4.56 to 4.57, he added.
The local note traded mostly lower against a basket of major currencies and mostly higher against Asean currencies.
The ringgit rose against the British pound to 5.8088/8190 from 5.8272/8317 at yesterday’s close, depreciated against the euro to 4.9233/9319 from 4.9229/9266 and fell against the Japanese yen to 3.0597/0655 from 3.0450/0475 previously.
Among Asean currencies, the ringgit inched up against the Indonesian rupiah to 281.0/281.7 from 281.2/281.6 yesterday and edged up against the Philippine peso to 7.82/7.84 from 7.83/7.84.
The local currency improved vis-a-vis the Thai baht to 12.8216/8513 from 12.8239/8384 previously, but was lower against the Singapore dollar to 3.4145/4207 from 3.4124/4153 at the close yesterday.
— Bernama
