Ringgit slips as US Treasury yields rise, Fed outlook weighs

KUALA LUMPUR, Sept 1 — The Malaysian ringgit opened weaker against the US dollar on Tuesday, as soaring US Treasury yields and uncertainty surrounding the Federal Reserve's interest rate outlook weighed on the currency, according to an analyst. By 8 am, the ringgit had slipped to 4.0300/0350 against the greenback, down from last Friday's close of 4.0230/0270.

Dr Mohd Afzanizam Abdul Rashid, chief economist at Bank Muamalat Malaysia Bhd, attributed the decline to the persistent rise in the 30-year US Treasury bond yield to 5.25 per cent, driven by expectations that the Fed may maintain a cautious stance on interest rates at the upcoming September 15-16 Federal Open Market Committee meeting.

This, he said, follows Fed Chairman Kevin Warsh's speech at the Jackson Hole Symposium, where he explicitly stated that inflation remains persistently high while the labor market remains robust, signaling a potential need for interest rate hikes. This stance appears to contradict the US Treasury Department's goal of lowering long-term bond yields through its bond buyback program.

This week, the focus will be on the release of Nonfarm Payroll data, with analysts projecting a recovery of 58,000 jobs in August after a job loss of 23,000 in the prior month. Additionally, the ringgit is expected to remain cautious against the US dollar due to the resumption of military attacks between the US and Iran, which have pushed Brent crude prices higher to US$90.49 (RM365) per barrel.

Consequently, the US dollar-ringgit pair is expected to trade within the 4.02-4.04 range today. At the opening, the ringgit showed strength against the British pound, appreciating to 5.4594/4662 from last Friday's close of 5.4632/4687, and also showed gains against the euro, climbing to 4.6817/6875 from 4.6828/6874. However, it weakened against the Japanese yen, falling to 2.5222/5255 from 2.5193/5219.

The local currency also traded weaker against regional currencies, falling against the Singapore dollar to 3.1702/1747 from 3.1652/1686 and remaining relatively flat against the Indonesian rupiah at 227.3/227.8. Nevertheless, it managed to rise against the Thai baht to 12.1525/1738 from 12.2087/2253, and remained unchanged against the Philippine peso at 6.46/6.47.