Ringgit opens almost flat vs greenback amid Middle East conflict

KUALA LUMPUR: The Malaysian ringgit opened almost unchanged against the US dollar on Tuesday as traders remained cautious due to the ongoing Middle East conflict. At 8am, the local currency hovered around 4.0420/4.0480, slightly higher than Monday's close of 4.0440/4.0485. Afzanizam Rashid, chief economist at Bank Muamalat Malaysia Bhd, suggested that the prolonged conflict may keep US inflation above the Federal Reserve's 2% target for an extended period.

This could push the US to consider an interest rate hike next week, fueled by robust non-farm payrolls data last week. The recent agreement between Iran and Oman to manage shipping through the Straits of Hormuz, nearing completion, indicates the conflict may linger, potentially keeping crude oil prices high. This is due to disruptions in Gulf oil supplies, which account for about 20% of global production.

Despite this, Afzanizam believes the ringgit will stay within a narrow range, primarily due to strong domestic economic conditions. Quintex Intel's global strategist, Stephen Innes, noted that a sharper-than-expected US Consumer Price Index (CPI) reading could support a September Fed rate hike, potentially benefiting the US dollar in the short term.

However, the ringgit underperformed against a basket of major currencies, slipping against the Japanese yen, euro, and British pound, while gaining against the Thai baht, Philippine peso, and Indonesian rupiah.