fbpx

Ringgit slips against soaring US$ as Fed disappoints

KUALA LUMPUR: The ringgit opened lower against the US dollar in early session today as the greenback soared after the policymaking Federal Open Market Committee (FOMC) slashed interest rate by 25 basis points.

At 9.00am, the ringgit stood at 4.1440/1470 from Wednesday’s 4.1250/1280.

Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said the 25 basis points cut and a slightly dovish remark by Federal Reserve’s chair, Jerome Powell seemed to have disappointed the market.

“The Fed is still sanguine about the state of the economy and therefore, the recent move was just insurance against the downside risk and to sustain the current economic expansion.

“Needless to say, the US dollar has gained more strength. And this can have a negative impact to emerging market currencies,” he told Bernama.

As such he added, the ringgit would trade on weaker bias against the US dollar and could linger at the current resistance level of RM4.1461.

Overall, the ringgit traded higher against a basket of major currencies.

It was stronger against the Singapore dollar at 3.0099/0132 from 3.0134/0162 on Wednesday and appreciated vis-a-vis the euro at 4.5750/5791 from 4.5969/6019.

The local currency also rose against the yen 3.7914/7952 from 3.7997/8029 and gained versus the British pound to 5.0180/0220 from 5.0189/0242 previously. – Bernama

Ambank research believes the Fed has left the door open to further interest rate cuts followings its 25bps reduction.

“The low inflation allows the Fed some latitude to take pre-emptive steps and hopefully avoid moving into the future to something like negative rates.

“Because it cut only 25bps, it avoided doing what some would have felt was more ‘shock and awe’ with 50bps. So, it can move towards a language like “data dependent” now that it has shown that it is prepared to be flexible,” it said.

However, it added that the recent PMI print signalled a synchronised slowdown, which should augur well for the dollar.

Moving forward, the research house remains cautious on the ringgit with trading pegged between its support levels of 4.1137 and 4.1182 and resistance at 4.1311 and 4.1374.

The key focus of the day would be on a slew of July Manufacturing print and the BoE interest rate decision where we expect policymakers to keep rates unchanged at 0.75%, it said.

Source: TheStar