Ringgit opens almost flat vs greenback amid ongoing west Asia conflict

KUALA LUMPUR: The Malaysian ringgit opened almost unchanged against the US dollar on Tuesday as traders remained cautious due to the ongoing conflict in West Asia. At 8 am, the local currency was trading at 4.0420/0480, up slightly from Monday's close of 4.0440/0485. Dr Mohd Afzanizam Abdul Rashid, the chief economist at Bank Muamalat Malaysia Bhd, stated that the persistent conflict could lead to US inflation remaining above the Federal Reserve's 2% target for an extended period.

This could potentially lead to discussions about a US interest rate hike next week, which have gained momentum due to strong non-farm payrolls (NFP) data released last week. Meanwhile, the recent agreement between Iran and Oman to manage shipping through the Straits of Hormuz suggests that the conflict with the US might continue for an extended period, which could result in higher crude oil prices due to ongoing disruptions to oil supplies from the Gulf region, responsible for about 20% of global oil supplies.

However, the ringgit is expected to maintain its tight trading range as domestic macroeconomic conditions provide a compelling reason to stay invested in Malaysian financial assets. The US dollar-ringgit is projected to range between RM4.04 and RM4.05 today. Quintex Intel's global strategist, Stephen Innes, indicated that a stronger US consumer price index (CPI) reading could support the case for a September Fed interest rate hike, potentially providing short-term support for the US dollar.

Analysts are increasingly leaning towards this possibility, although the markets remain largely uncertain about the September decision. The ringgit traded lower against a basket of major currencies, slipping against the Japanese yen, falling versus the euro, and easing against the British pound. However, it strengthened against regional currencies, gaining against the Thai baht, inching up against the Philippine peso, and gaining slightly against the Indonesian rupiah.