Ringgit opens slightly higher against dollar ahead of key US CPI

KUALA LUMPUR, Sept 7 — The Malaysian ringgit opened slightly higher against the US dollar on Friday, Sept 7, as traders anticipated a possible interest rate hike by the United States Federal Reserve. The local currency showed gains up to 4.0415/0500 from Friday’s close of 4.0425/0465. Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid noted that the stronger-than-expected US non-farm payrolls (NFP) data indicates the Fed may raise interest rates at their upcoming meeting on Sept 15-16.

Afzanizam explained that the NFP figure for August came in at 162,000, significantly surpassing expectations of 55,000, while July's revised figure was 21,000, up from the initial estimate of 23,000. He also remarked that the labour force participation rate improved to 61.6 per cent, following a downward trend since January. The ringgit is expected to experience some volatility, potentially fluctuating between 4.04 and 4.06 against the greenback due to the focus on the US consumer price index (CPI) release on Friday.

This data point will influence the Federal Open Market Committee’s (FOMC) deliberations on the Fed Funds Rate, currently set between 3.50 per cent and 3.75 per cent. The odds of a 25-basis-point increase have increased, potentially impacting market sentiments. Meanwhile, global strategist Stephen Innes of Quintex Intel suggested a relatively steady trading range for the ringgit at the beginning of the week, with a mildly positive outlook.

He pointed out that higher energy prices might provide some support for Malaysia, as it remains a net energy exporter, primarily due to its substantial liquefied natural gas surplus. Furthermore, Innes highlighted that Malaysia's growing presence in the regional artificial intelligence (AI) and semiconductor supply chain, encompassing assembly, testing, advanced packaging, and digital infrastructure, offers an additional medium-term support for the ringgit amid global capital flows towards the Asian AI investment theme.

The ringgit performed mostly stronger against major currencies, including the British pound and the euro, while it weakened against the Japanese yen. However, it traded slightly lower against regional currencies, such as the Singapore dollar and the Thai baht, remaining near unchanged against the Philippine peso and the Indonesian rupiah.