KUALA LUMPUR, Dec 12 — The ringgit closed lower against the US dollar today as the greenback strengthened ahead of interest rate decisions from multiple central banks.
At 6pm, the local note was traded at 4.4150/4200 against the US dollar compared to 4.4010/4080 at the close last Friday.
SPI Asset Management managing director Stephen Innes said worries about a global recession ahead of potential rate hikes this week led to weaker risk sentiment in the Asian market.
“Local markets have been counting on China’s reopening, but that alone may not be enough to stave off a significant decline in exports to Western markets if a recession hits,” he told Bernama.
Meanwhile, Bank Islam Malaysia Bhd chief economist Firdaos Rosli said on a weekly basis, the ringgit was traded lower against the US dollar as market participants were worried over the gloomy outlook on the global economy.
He said investors remained cautious ahead of the Federal Open Market Committee (FOMC) meeting, which would be followed by a statement on December 14.
“Though the market is pricing in a 50-basis point (bps) Federal Funds Rate (FFR) hike in December, the local note is still pressured by the widening interest rate differential between the FFR and the Overnight Policy Rate (OPR) following the US Federal Reserve’s aggressive rate hikes up to now,” said Firdaos.
The FFR has been raised by 375 bps since March this year versus a 100-bps increase in OPR.
Aside from the FOMC meeting, he said, the ringgit movement could be swayed by the announcement of the monetary policy decisions by the European Central Bank (ECB) and Bank of England (BoE).
Further tightening financial conditions could drag further the US dollar index which is already slipping below the 105 level thus, benefitting the local note, Firdaos said.
“We expect policy clarity will manifest over the coming weeks following the (announcement of the) complete Cabinet line-up in Prime Minister Datuk Seri Anwar Ibrahim’s administration last week.
“Amalgamating diverging interests of the new ruling coalition may take some time, considering the differences in the composition of the new Cabinet,” he said.
Bank Islam, Firdaos said, envisaged that the ringgit might strengthen further in due time as the process went along.
“Considering the mixed views, we anticipate the ringgit could trade between RM4.40 and RM4.43 during the week against the greenback,” he added.
The ringgit was traded mostly lower against a basket of major currencies this morning.
The local note eased against the British pound to 5.4190/4251 from 5.3908/3994 at Friday’s close, declined vis-à-vis the euro to 4.6622/6675 from 4.6466/6540, and weakened versus the Singapore dollar to 3.2641/2683 from 3.2545/2601.
However, it edged up against the Japanese yen to 3.2311/2350 from 3.2315/2369 previously.
— Bernama
