KUALA LUMPUR: The ringgit opened flat against the strengthening US dollar on Thursday amid rising demand for the greenback following the release of the US Federal Reserve (Fed) minutes, said an analyst.
At 8 am, the ringgit traded at 4.5000/5100 against the greenback from 4.5000/5050 yesterday’s close.
The US Dollar Index (DXY) continues to climb to 108.994 points, higher by 0.42 per cent compared to the previous close.
UOB Kay Hian Wealth Advisors head of investment research Mohd Sedek Jantan said the minutes released yesterday highlight that the US Fed has incorporated assumptions about potential changes in trade policy under the incoming President-elect Donald Trump’s administration.
He said the "placeholder assumptions” indicate that the US Fed is evaluating how anticipated policy shifts, such as changes to trade agreements or the imposition of tariffs, might affect the economy.
"The US Fed’s assessment should serve as an important consideration for the Trump 2.0 administration, particularly if it plans to implement higher trade tariffs.
"While the objectives of the US Fed and the administration may differ, elevated tariffs are likely to have adverse effects on economic growth,” he told Bernama.
Hence, Mohd Sedek expects the US Fed to execute only two rate cuts this year and anticipates the ringgit will remain under pressure and trade weaker against the US dollar in the near term.
Meanwhile, Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said the Federal Open Market Committee (FOMC) minutes in its December meeting showed that the members were neutral to slightly hawkish about their tone towards the economy.
"It seems the rate cut journey this year is likely to be gradual,” he said, adding that the initial jobless claims (IJC) came in lower than expected to 201,000 last week against consensus estimates of 214,000.
Mohd Afzanizam said these factors seem to be dollar positive, and therefore, the ringgit is expected to remain soft against the greenback in the near term.
Meanwhile, the ringgit opened mostly higher against a basket of major currencies.
It advanced against the British pound to 5.5616/5739 from 5.6020/6083 and rose vis-a-vis the euro to 4.6413/6516 from 4.6431/6483. However, it fell against the Japanese yen to 2.8452/8517 from Wednesday’s close of 2.8449/8482.
The local note traded mixed against ASEAN currencies.
It climbed against the Thai baht to 12.9863/13.0260 from 12.9949/13.0168 at the previous close and was higher vis-a-vis the Singapore dollar to 3.2892/2968 from 3.2919/2958.
The ringgit was almost flat against the Indonesian rupiah at 277.5/278.3 compared with 277.5/278.0 and also against the Philippine peso to 7.70/7.73 from 7.70/7.72 on Wednesday. - Bernama
