KUALA LUMPUR: The ringgit opened lower against the US dollar in early trade today as the US Dollar Index (DXY) showed resilience and continued to strengthen.
At 9.06 am, the local note decreased to 4.5590/5620 against the greenback compared with 4.5400/5450 at Wednesday’s close.
Bank Muamalat Malaysia Bhd chief economist and social finance head Dr Mohd Afzanizam Abdul Rashid said the US Dollar Index (DXY) increased by 0.31 per cent to 102.62 points yesterday.
“Despite Fitch Rating downgrading the US sovereign rating by one notch, from AAA to AA+ yesterday, the change in credit rating has not yet impacted the value of the US dollar, although the credit risks associated with the country have increased,” he told Bernama.
Mohd Afzanizam said that risk-free assets such as US Treasury securities will likely see upward adjustments, which could impact other asset classes, including equities, as the discount rate used for asset valuation will be higher.
“This situation might prompt the Federal Reserve to adopt a more cautious monetary stance, potentially leading to a halt in interest rate hike,” he said.
As for the ringgit, he said that given the mixed views on the US economy and currency, it is expected to hover around 4.54-4.55 today.
The ringgit also traded mostly higher against a basket of major currencies.
It dropped against the euro to 4.9871/9904 from 4.9831/9886 at Wednesday’s close but was up against the Japanese yen to 3.1817/1840 from 3.1824/1861 and rose against the British pound to 5.7949/7988 from 5.7994/8085 previously.
Meanwhile, the local unit traded mostly lower against other Asean currencies.
The ringgit went down versus the Singapore dollar to 3.3967/3994 from 3.3944/3984 at the close on Wednesday, decreased against the Indonesian rupiah to 300.3/300.7 from 299.1/299.6 and was lower against the Philippine peso to 8.24/8.26 from 8.22/8.24.
It improved vis-a-vis the Thai baht at 13.2233/2385 from 13.2504/2716 previously.
US dollar rises
The US dollar strengthened on Wednesday, boosted by long-term US Treasury yields despite Fitch’s downgrade of the US sovereign credit rating, reported Xinhua.
The dollar index, which measures the greenback against six major peers, rose 0.28 per cent to 102.5877 in late trading.
Fitch cut the US credit rating from top-notch AAA to AA+ on Tuesday, citing fiscal deterioration.
With Tuesday’s decision, Fitch joined S&P in rating the United States one notch below the strongest grade, but Moody’s, the other member of the big three American ratings firms, still gave the country its highest assessment.
Two smaller firms, Kroll Bond Rating Agency and DBRS Morningstar, have also maintained AAA ratings on the US government.
Fitch’s downgrade raised concerns, but the market reacted calmly, as long-term US Treasury yields gained on Wednesday after strong private employment data and the announcement of the US government’s maturing debt refunding.
The US benchmark 10-year Treasury yield advanced to 4.077 per cent from 4.048 per cent Tuesday.
Investors are also focusing on positive economic data. The US private sector companies added far more jobs than expected in July, pushed higher by a boom in leisure and hospitality jobs, payroll processing firm ADP reported Wednesday.
Job gains for the month came to 324,000, driven by a 201,000 jump in hotels, restaurants, bars and affiliated businesses, which was well above expectation.
In late New York trading, the euro was down to 1.0943 US dollars from 1.0974 dollars in the previous session, and the British pound fell to 1.2721 US dollars from 1.2772 dollars.
The US dollar bought 143.2550 Japanese yen, lower than 143.3900 Japanese yen of the previous session. The US dollar rose to 0.8772 Swiss francs from 0.8755 Swiss francs, and it rose to 1.3342 Canadian dollars from 1.3291 Canadian dollars. The US dollar increased to 10.7123 Swedish Krona from 10.6123 Swedish Krona.
Short-terms rates remain stable
Short-term rates are expected to remain stable today on Bank Negara Malaysia’s (BNM) operations to absorb surplus liquidity from the financial system.
Liquidity is estimated at RM35.28 billion in the conventional system and RM23.53 billion in Islamic funds.
Today, the central bank will conduct a RM1 billion conventional money market tender for seven days and two Qard tenders of RM800 million for seven days and RM400 million for 14 days.
It also announced the availability of reverse repo, sale and buy-back agreements as well as collateralised commodity murabahah facilities for tenors of one to three months.
Additionally, the central bank announced the opening of a RM3 billion Bank Negara Interbank Bills (BNIB) tender for 31 days, to be issued on Aug 7.
At 4 pm, BNM will conduct up to RM36.3 billion conventional overnight tender and RM22.3 billion for murabahah overnight tender.
Foreign exchange rates
Following are the opening Malaysian foreign exchange for major currencies today:
1 USD 4.5590/5620
100 yen 3.1817/1840
1 pound 5.7949/7988
1 euro 4.9871/9904
1 SGD 3.3967/3994
100 baht 13.2233/13.2385
1 mln rupiah 300.3/300.7
100 PESOS 8.24/8.26
Gold down
The physical price of gold as at 9.30 am stood at RM274.81 per gramme, down 59 sen from RM275.40 at 5 pm yesterday. – BERNAMA
