KUALA LUMPUR (June 23): The ringgit opened higher against the US dollar today despite a strengthening greenback, supported by steady crude oil prices and the positive sentiment brought about by the reaffirmation of Malaysia’s sovereign rating.
The US dollar extended its rebound from yesterday after a sharp corrective pullback on Monday.
At 9am, the local note had risen to 4.1510/1555 versus the greenback from 4.1590/1620 at yesterday’s close.
Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said S&P Global Ratings’ (S&P) affirmation of Malaysia’s sovereign credit ratings indicated that the government’s finances are still in good condition, supported by the ringgit.
S&P affirmed Malaysia’s foreign currency and local currency long-term issuer ratings at A- and A respectively, with a negative outlook.
Mohd Afzanizam said Brent crude oil prices, which were hovering between US$74 and US$75 per barrel, also remained supportive of the local currency.
“On another note, the latest comment by the US Federal Reserve (Fed) chair, Jerome Powell, has reassured market participants that the US central bank is in no hurry for a rate hike,” he said.
He noted that Powell’s remarks had boosted the equities market, resulting in the tech-heavy Nasdaq posting another record high as investors adopted risk-on mode.
“Against such a backdrop, there could be a spillover to the US dollar versus ringgit pair (USD-MYR), which weakened yesterday, and this should limit the extent of the ringgit’s depreciation against the greenback, possibly around RM4.14 to RM4.15,” he told Bernama.
Powell reportedly said that the US economy continued to show “sustained improvement”, but that inflation remained a concern.
Meanwhile, ActivTrades trader Dyogenes Rodrigues Diniz opined that growing concerns about inflation in the US had become a reality.
Although the Fed did not make any clear move, Powell’s speech made it clear that the interest rate for the US dollar is likely to increase before September 2023, he said.
“The market had priced that information in and pushed the US dollar up to break the important resistance level of 4.1500 against the ringgit.
“Now, there is no nearby resistance, so it could fluctuate until it reaches 4.1700 in the next few days,” he noted.
At the opening, the ringgit was mostly lower against a basket of major currencies, except the Japanese yen.
It weakened against the Singapore dollar to 3.0883/0919 versus 3.0874/0901 at yesterday’s close, slipped against the British pound to 5.7865/7928 from 5.7681/7723, and depreciated vis-a-vis the euro to 4.9530/9583 from 4.9426/9461 yesterday.
Conversely, the local note advanced against the Japanese yen to 3.7484/7528 from 3.7658/7689 previously.-BERNAMA