Ringgit opens lower amid elevated US treasury yields

KUALA LUMPUR: The Malaysian ringgit started the day weaker against the US dollar on Tuesday due to high US Treasury yields and speculation surrounding the Federal Reserve's stance on interest rates, according to an analyst. By 8am, the local currency slipped to 4.0300/0350 against the greenback, down from last Friday's close of 4.0230/0270.

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid explained that the persistent 30-year US Treasury bond yield rise to 5.25% was a result of expectations that the Fed might keep interest rates steady at their upcoming meeting on September 15-16. This, he noted, was prompted by Fed Chairman Kevin Warsh's statement at the Jackson Hole Symposium, where he mentioned high inflation and a robust labor market, suggesting a need for rate hikes.

This stance contradicts the US Treasury's goal of reducing long-term bond yields via its bond-buyback program, according to Rashid. The focus for this week will be on the Nonfarm Payroll (NFP) data release, with analysts forecasting a recovery of 58,000 jobs in August after a loss of 23,000 in the previous month. The ringgit is anticipated to stay volatile against the US dollar following the resumption of US-Iran military clashes, which drove Brent crude prices up to US$90.49 per barrel.

Consequently, the US dollar-ringgit pair is projected to fluctuate between 4.02 and 4.04 today. At the opening, the ringgit performed mixed against major currencies; it gained against the British pound to 5.4594/4662, climbed against the euro to 4.6817/6875, but slipped against the Japanese yen to 2.5222/5255. The local note showed a general decline against regional currencies, weakening against the Singapore dollar to 3.1702/1747 from 3.1652/1686, staying stable against the Indonesian rupiah at 227.3/227.7, improving against the Thai baht to 12.1525/1738, and remaining unchanged against the Philippine peso at 6.46/6.47.