Ringgit opens lower on renewed US rate increase expectations

The Malaysian ringgit started Thursday's trading session weaker against the US dollar, driven by solid US inflation data that heightened expectations of a potential interest rate hike by the US Federal Reserve. At 8am, the ringgit fell to 4.0820/4.0865 against the US dollar, down from Wednesday's close of 4.0805/4.0850. Bank Muamalat Malaysia Bhd chief economist Afzanizam Rashid noted that the US Dollar Index (DXY) increased by 0.36% to 102.55 points after headline inflation rose to 3.7% in September, surpassing the market expectation of 3.6%.

Core inflation also rose to 2.6% in September from 2.4% in August. Afzanizam pointed out that higher gasoline prices were the primary catalyst, with the transport sub-index climbing to 7.9% in September from 6.2% in August. Following the inflation figures, Chicago Fed President Austan Goolsbee expressed concern, suggesting that Fed officials might consider raising the federal funds rate at their meeting on Oct 27-28.

This development has intensified expectations of a US rate increase, potentially exerting additional downward pressure on the ringgit. While the ringgit is expected to trade between RM4.08 and RM4.09 today, Afzanizam also highlighted Malaysia's advance GDP growth estimate for the third quarter of 2026, which could provide some support to the local currency.

He anticipates sustained economic growth around 5.0% in Malaysia, potentially paving the way for a normalization of the Overnight Policy Rate (OPR) at a future date. The ringgit opened mostly weaker against major currencies, strengthening against the British pound to 5.4005/5.4064, weakening against the Japanese yen to 2.5840/2.5870, and edging down against the euro to 4.5694/4.5744.

Against its Asean peers, the ringgit traded mostly higher, gaining against the Singapore dollar, Thai baht, and Philippine peso, but weakening against the Indonesian rupiah.