Ringgit, regional peers edge lower ahead US inflation reading

KUALA LUMPUR: The ringgit and most of its regional peers were traded lower on Wednesday as the US dollar gained across the board ahead of US inflation data release this week.

At 6 pm, the ringgit edged down to 4.7690/7730 against the greenback compared with Tuesday’s close of 4.7585/7635.

The Singapore dollar, Thai Baht and the Indonesian rupiah weakened by 0.20 per cent, 0.48 per cent and 0.60 per cent, respectively.

SPI Asset Management managing director Stephen Innes said the ringgit’s rebound following Bank Negara Malaysia’s (BNM) comments that the local unit was undervalued was overshadowed by the strong greenback.

“This trend has persisted despite weaker-than-expected US durable goods data and a decline in US consumer confidence overnight.

“Traders appear to be expressing concerns ahead of the US Personal Consumption Expenditures (PCE) deflator release on Thursday, which is likely to confirm the hotter prints observed in both the US Producer Price Index (PPI) and Consumer Price Index (CPI) data,” he told BK.

He noted the challenge lies in the fact that the PCE is the Federal Reserve’s preferred inflation gauge.

“Thus, if the PCE deflator shows a higher-than-expected print, it could further delay expectations for interest rate cuts in 2024. Hence, investors are buying the US dollar as a hedge against a higher PCE print than the forecast,” he said.

Head of wealth research and advisory, designated portfolio manager at UOB Kay Hian Wealth Advisors, Mohd Sedek Jantan said the market seems to be reacting well to BNM’s assurance on the local currency’s valuation and the government’s efforts to tackle the declining ringgit.

This can be seen in BNM’s ringgit rate ending higher at 4.7675 today against the greenback from the previous day’s 4.7705.

He said UOB Kay Hian Wealth Advisors forecasts the local unit to end the first quarter of 2024 at the 4.70 level.

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

The local currency improved vis-a-vis the Japanese yen to 3.1635/1664 from 3.1671/1706 at Tuesday’s close, rose against the British pound to 6.0199/0250 from 6.0362/0425 yesterday, and strengthened versus the euro to 5.1510/1553 from 5.1625/1679 previously.

The ringgit also performed better against other Asean currencies.

It edged up versus the Thai baht to 13.2252/2421 from Tuesday’s close of 13.2782/2984 and was up against the Singapore dollar at 3.5405/5437 compared to 3.5419/5459 previously.

The local note also gained versus the Philippine peso to 8.47/8.49 from 8.48/8.49 yesterday and inched up vis-a-vis the Indonesian rupiah to 303.8/304.3 from 304.1/304.6. – BK