Ringgit opens slightly lower but steady against greenback
KUALA LUMPUR: The ringgit opened slightly lower against the US dollar on Thursday but remained steady amid positive sentiment surrounding the market, and despite a respite in the greenback’s weakness, dealers said.
At 9.00 am, the ringgit stood at 3.8850/8900 against the greenback from Thursday’s close of 3.8840/8870.
The US dollar turned positive on Thursday when President Donald Trump said he wanted a “strong dollar,” when commenting on Treasury Secretary, Steven Mnuchin’s remarks a day earlier.
Mnuchin had said he welcomed a weaker greenback, which resulted in the currency weakening to a three-year low.
Oanda Corp Head of Trading for the Asia Pacific, Stephen Innes, said the market had more significant exposure in the ringgit than projections.
“So, when Bank Negara Malaysia (BNM) delivered the consensus rate hike, it did not get the follow through as expected.
“It was likely a case of moving too far, too quick, and market players were ready to book profits on the initial move lower,” he added.
Innes said the ringgit’s immediate gains were likely held back by a somewhat laissez-faire view towards domestic inflation projections when it was suggested that the Consumer Price Index is expected to average lower in 2018.
“This implied a one and done rate hike for 2018 and more dovish than expected on the inflation front.
“BNM is suggesting inflation pressures are not that strong, meaning the latest policy decision was little more than removing emergency accommodation delivered, as a buffer for the potentially destabilising effect from Brexit.
“However, moving forward, the ringgit should remain well supported by a robust macro foundation and higher energy prices. The market consideration of extended cyclical downtrend on the US dollar could also push the ringgit to rally below 3.80 in the near term with a possible move to 3.70 if another rate hike in 2018 becomes a reality,” he added.
Innes said for today, we should expect local currencies to track the movement of the US dollar against the Japanese yen, as well as the Chinese Yuan Renminbi as the critical regional drivers for the dollar sentiment.
Meanwhile, the ringgit traded higher against a basket of major currencies.
It strengthened against the euro to 4.8197/8271 from Thursday’s 4.8286/8327 and rose against the Singapore dollar to 2.9663/9706 from 2.9746/9781.