Ringgit opens flat against greenback as markets weigh US interest rate outlook

KUALA LUMPUR: The Malaysian ringgit opened at 4.0800/4.0845 against the US dollar on Friday, remaining virtually unchanged from yesterday's close of 4.0800/4.0835, according to initial market data. Bank Muamalat Malaysia Bhd's chief economist, Afzanizam Rashid, explained that the US dollar Index (DXY) experienced a slight decline of 0.53% to 102.005 points, alongside a drop in Brent crude oil prices to around US$105 per barrel.

He noted that the DXY's decrease, reflecting the dollar's strength against a basket of major currencies, typically provides support to the ringgit by reducing upward pressure on the greenback. However, Afzanizam highlighted that persistent US inflation and the likelihood of the Federal Reserve maintaining its tight monetary policy might counterbalance these gains.

The International Energy Agency's (IEA) decision to release 100 million barrels from its oil reserves offered brief relief to the oil market, but supply issues persisted. Meanwhile, concerns over valuations in AI-related stocks led to investors seeking safer assets, such as US Treasury bonds, which saw a drop in yields. Afzanizam pointed out that the September Producer Price Index (PPI) reading for the US was higher than expected at 6.3%, indicating elevated inflation, and could prompt the Fed to retain a restrictive stance during its upcoming Federal Open Market Committee (FOMC) meeting.

Looking at domestic factors, market participants will closely monitor Malaysia's advance estimate of the third quarter 2026 GDP, which is expected to grow by approximately 5.2%. While this is slightly lower than the 6% growth seen in the previous quarter, Afzanizam believes the figure still reflects solid economic performance and could help support the ringgit as the central bank considers normalizing its overnight policy rate.