Ringgit slips against US dollar as oil prices, Fed rate hike bets rise

KUALA LUMPUR, Sept 2 - The Malaysian ringgit started the day weaker against the US dollar on Wednesday, driven by higher oil prices and expectations of a possible US Federal Reserve rate increase, according to an analyst. At 8am, the local currency fell to 4.0380/0445 against the greenback, down from Tuesday's close of 4.0370/0410.

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid highlighted the resumption of military clashes between the US and Iran, which pushed Brent crude oil prices higher, as the primary concern for traders and investors amid ongoing geopolitical risks. Brent crude was up 0.78 percent at US$95.46 (RM385) per barrel at the time of reporting.

Dr Afzanizam noted that concerns over rising inflation and the likelihood of a Fed rate hike strengthened the US dollar's value, with the US dollar index (DXY) increasing 0.25 percent to 99.677 points, raising the probability of a higher US interest rate during the September Federal Open Market Committee meeting to 65 percent. He anticipates the ringgit to trade cautiously within the range of 4.03 to 4.05 throughout the day.

The ringgit opened stronger against a basket of major currencies, including the Japanese yen, British pound, and euro, but weakened relative to regional currencies like the Singapore dollar, Indonesian rupiah, Thai baht, and Philippine peso.