Ringgit opens slightly higher against US dollar

The Malaysian ringgit opened marginally higher against the US dollar on Monday, driven by predictions of a potential US interest rate increase following robust non-farm payrolls data from the United States. At 8 a.m., the local currency climbed to 4.0415/4.0500 against the greenback, up from last Friday's closing rate of 4.0425/4.0465.

Afzanizam Rashid, chief economist at Bank Muamalat Malaysia Bhd, stated that the unexpectedly strong US non-farm payrolls data suggests the Federal Reserve may raise interest rates during their upcoming meeting on September 15-16. The US non-farm payrolls in August came in at 162,000, significantly exceeding the anticipated 55,000, while July's figure was revised upward to 21,000 from the initial estimate of 23,000.

Labor force participation rate also improved to 61.6% after a steady decline since January of this year. The market is closely monitoring the US Consumer Price Index (CPI) on Friday, as this data point will influence FOMC members' deliberations on the Fed Funds Rate, currently set at 3.50%-3.75%. The odds of a 25-basis-point hike have risen, which could impact market sentiment this week.

Meanwhile, global strategist Stephen Innes anticipates the ringgit will trade relatively tight early in the week but with a modestly positive outlook. The stronger energy prices could provide support for Malaysia, given its role as a net energy exporter through substantial liquefied natural gas surplus. Structural improvements, such as Malaysia's growing presence in the regional artificial intelligence (AI) and semiconductor supply chain, including assembly, testing, advanced packaging, and digital infrastructure, offer additional medium-term support to the ringgit.

However, the local currency traded lower against regional currencies, easing against the Singapore dollar and falling against the Thai baht, while remaining almost flat against the Philippine peso and unchanged against the Indonesian rupiah.