Cautious sentiment ahead of US CPI data drags ringgit lower

KUALA LUMPUR: The ringgit retreated in early trade Wednesday as the US dollar continues to gain traction while the markets await the US Consumer Price Index (CPI) print which will be announced on Thursday.

At 9.01 am, the ringgit depreciated to 4.6495/6565 versus the greenback from Tuesday’s close of 4.6405/6445.

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the US dollar Index (DXY) is currently hovering around 102.523 points, higher from the start of January 2024 at 101.333 points, suggesting that the narrative for earlier rate cut appears to have diminished.

He noted that recent data have been quite mixed with the Nonfarm Payroll (NFP) coming in higher at 216,00 in December from 173,000 in the prior month, while the US ISM Index for the services sector fell to 50.6 points in the same month from 52.7 points previously.

“Having said that, the US labour market has softened with the monthly average for NFP falling from 399,000 in 2022 to 225,000 in 2023. Furthermore, the Labour Force Participation Rate (LFPR) was lower in December to 62.5 per cent from 62.8 per cent in the prior month.

“In that sense, the thesis for a rate cut in the US is still very much intact as the Federal Reserve needs to come in and help the economy by way of reducing the Fed Funds Rate to ensure that a soft landing can be achieved,” he said.

Therefore, Mohd Afzanizam expects the ringgit to remain in a narrow range between 4.64 and 4.65 for now as the market will continue to observe the incoming data.

Meanwhile, the ringgit was traded mostly lower against a basket of major currencies.

It weakened versus the euro to 5.0819/0896 from yesterday’s close of 5.0790/0834 and depreciated vis-a-vis the British pound to 5.9100/9189 from 5.9092/9143 but was higher against the Japanese yen to 3.2165/2216 from 3.2235/2265 previously.

The ringgit was traded mixed against Asean currencies.

It appreciated against the Thai baht to 13.2718/2993 from 13.2737/2928 at Tuesday’s close and rose vis-à-vis the Philippine peso to 8.27/8.30 from 8.28/8.29 yesterday.

The local unit eased against the Singapore dollar to 3.4925/4980 from 3.4912/4947 yesterday and was lower versus the Indonesian rupiah to 299.5/300.1 from 298.9/299.4 previously. – BK