Ringgit opens higher vs greenback as US inflation slows

KUALA LUMPUR: The ringgit opened higher today as demand for the US dollar declined after the US Consumer Price Index (CPI) data came in lower than expected at 3.2 per cent in October versus consensus estimates of 3.3 per cent.

At 9.09 am, the ringgit strengthened to 4.6550/6600 against the greenback from Tuesday’s close of 4.7165/7210.

Bank Muamalat Malaysia Bhd chief economist and social finance head Dr Mohd Afzanizam Abdul Rashid said the October US inflation rate was in fact lower compared to the prior two consecutive months when the CPI grew by 3.7 per cent in each month.

Meanwhile, core CPI moderated further to 4.0 per cent in October from a high of 6.6 per cent in September last year.

Mohd Afzanizam said the inflation outturn suggests that the US Federal Reserve (Fed) has delivered its mandate to bring down inflation and therefore, the prevailing Federal Funds Rate has neared its peak level.

The two-year US Treasury yield was down by 21 points to close at 4.83 per cent and and the 10-year yield fell by 19 basis points to 4.45 per cent, while the US Dollar Index (DXY) dropped 1.47 per cent to 104.081 points.

“The ringgit is expected to trend upwards following the decline in the US dollar,” he told BK.

Meanwhile, the Finance Ministry said the flexible ringgit exchange rate plays an important role in reducing the impact of external shocks on domestic economic activity.

Thus, Bank Negara Malaysia (BNM) would continue to manage risks from domestic and external developments to deal with volatility in the foreign exchange market and be prepared to use its operational policy instruments to ensure orderly market conditions.

“BNM, as the central bank responsible for the stability of the financial and currency markets, will always ensure that the adjustment of the ringgit is in order,” according to the ministry’s response on the Parliament website on Tuesday.

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

It gained versus the Japanese yen to 3.0914/0949 from 3.1091/1123 at Tuesday’s close, but eased against the euro to 5.0605/0659 from 5.0570/0619 yesterday and fell vis-a-vis the British pound to 5.8113/8175 from 5.8032/8087.

However, the local currency was traded mostly firmer against other Asean currencies.

It appreciated against the Singapore dollar to 3.4487/4526 from 3.4675/4713 yesterday and was higher vis-a-vis the Indonesian rupiah at 296.5/297.0 compared with 300.4/300.9 previously.

However, the ringgit fell against the Thai baht to 13.1001/1212 from 13.0760/0946 yesterday but ticked up to 8.34/8.36 versus the Philippine peso from 8.41/8.42 at Tuesday’s close. – BK