Ringgit jumps 225 basis points at opening on mixed US economic data

KUALA LUMPUR: The ringgit gained 225 basis points and strengthened against the US dollar subsequent to the United States’ (US) release of mixed economic data and investors’ anticipation of an interest rate cut based on the Federal Open Market Committee (FOMC) meeting earlier this week.

At 9 am, the ringgit opened at 4.7310/7380 against the greenback from Thursday’s close of 4.7535/7555.

Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said the continuous fall in the US Treasury yields since the FOMC meeting this week suggested that expectation for a rate cut is building up.

“The two-year US Treasury yield fell nine basis points to 4.87 per cent as the short dated securities are the most sensitive to the Fed Fund Rate,” he told BK.

Mohd Afzanizam said that by extension, the US Dollar Index declined by 0.43 per cent to 105.499 points.

“On that note, the ringgit and other emerging currencies will probably stage further rebounds today,” he told BK.

On the US economic data, he said investors are digesting the series of economic data released from the US and they are waiting for the non-farm payroll and unemployment data to be released later before making further moves.

“The US manufacturing sector experienced a contraction in April, with the ISM Manufacturing PMI falling to 49.2 from 50.3 in March and US Job openings also fell to a three-year low in March, and the number of people leaving their jobs decreased, indicating a slowing in labour demand.

“But the US Jobless Claims still remain resilient and the Automatic Data Processing (ADP) report showed that private sector employment in the US increased by 192,000 jobs, which was more than expected,” he said.

At the opening, the ringgit was traded mostly higher against a basket of major currencies.

It rose against the euro to 5.0768/0843 from 5.0877/0898 previously and traded slightly higher vis-a-vis the British pound to 5.9341/9429 from 5.9490/9515 recorded at yesterday’s close but it fell further versus the Japanese yen to 3.0877/0927 from 3.0614/0629 at Thursday’s close.

At the same time, the local note was higher against ASEAN currencies.

It appreciated versus the Thai baht to 12.8420/8680 from 12.8615/8729 on Thursday and went up versus the Singapore dollar to 3.4949/5006 from 3.4970/4987 previously.

The ringgit inched up vis-a-vis the Indonesian rupiah to 292.2/292.8 from 293.6/293.9 on Thursday and strengthened against the Philippine peso to 8.23/8.25 from 8.26/8.27 previously. – BK