KUALA LUMPUR: The ringgit extended its downtrend to open lower against the US dollar in the early session today as investors continued to seek refuge in safe haven currencies on concerns over the global economic prospects, an economist said.
At 9 am, the local note eased to 4.6485/6525 against the greenback from 4.6385/6425 at yesterday’s close.
Bank Muamalat Malaysia Bhd chief economist and social finance head Dr Mohd Afzanizam Abdul Rashid said the local unit remained weak as major central banks were seen taking hawkish stands amidst a tight global liquidity environment.
“Markets are feeling anxious as the Federal Reserve (Fed) might maintain that the restrictive monetary stance is here to stay to bring down the inflation.
“Investors are likely to pay attention to the upcoming speech by Fed chair Jerome Powell before the US Congress, which is expected to offer insights on the economy,” he told Bernama
Meanwhile, the ringgit was also traded lower against a basket of major currencies.
It depreciated versus the British pound to 5.9310/9361 from 5.9220/9271 at yesterday’s close, fell against the Japanese yen to 3.2810/2840 from 3.2751/2781 on Tuesday and weakened vis-a-vis the euro to 5.0743/0787 from 5.0676/0719 previously.
Similarly, the local note traded mostly lower against other Asean currencies.
The ringgit inched up against the Thai baht to 13.3152/3378 from yesterday’s 13.3486/3666, but went down against the Singapore dollar to 3.4540/4590 against 3.4490/4556 previously.
It also fell versus the Indonesian rupiah to 308.9/309.4 from 308.5/309.2 on Tuesday and dropped against the Philippines’ peso to 8.31/8.33 from 8.30/8.32 yesterday.
US dollar steadies
The US dollar treaded water on Tuesday as investors kept a wait-and-see stance one day ahead of Fed Chairman Jerome Powell’s hearing in the US Congress, reported Xinhua.
The dollar index, which measures the greenback against six major peers, was up 0.01 per cent to 102.5371 in late trading.
The dollar gained ground on Tuesday morning, thanks to expectation-beating housing starts and permits in the United States in May and strong safe-haven demand before paring most of its gains in the afternoon.
The United States reported 1.631 million units of annualised housing starts in May, higher than forecast consensus of 1.4 million units and April’s 1.34 million units, according to data issued by the US Census Bureau on Tuesday morning.
Meanwhile, the annualised rate of permits stood at 1.491 million units in May, higher than forecast consensus of 1.433 million units and 1.417 million units in the previous month.
The fall in stock markets and lower commodity prices also drove up safe haven demand and bolstered the US dollar on Tuesday.
The US dollar’s rebound is driven by rising demand for safe-haven assets and traders reacted to encouraging housing starts and building permits reports, noted Vladimir Zernov, analyst with market information supplier FX Empire.
Powell is scheduled to testify at the US Congress in the coming two days, which draws investors’ attention.
In late New York trading, the euro was down to US$1.0917 from US$1.0919 in the previous session, and the British pound fell to US$1.2759 from US$1.2779 in the previous session.
The US dollar bought 141.3700 Japanese yen, lower than 141.9470 Japanese yen of the previous session. The US dollar rose to 0.8978 Swiss franc from 0.8962 Swiss franc, and it rose to 1.3229 Canadian dollars from 1.3214 Canadian dollars. The US dollar rose to 10.8024 Swedish Krona from 10.7285 Swedish Krona.
“We expect rate differentials between the US dollar and other currencies to narrow and see the dollar’s downtrend resuming in the months ahead,” said UBS strategists in a mid-year outlook report issued on Tuesday.
Investors are advised to diversify their holdings of the US dollar and add positions in the Japanese yen, British pound, euro, or the Swiss franc in a tactical manner, according to the UBS report.
Short-term rates
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 RM49.33 billion in the conventional system and RM29.56 billion in Islamic funds.
Today, the central bank will conduct a RM1.5 billion conventional money market tender for seven days and one RM100 million Commodity Murabahah Programme tender for 14 days.
It will also conduct two reverse repo tenders, consisting of a RM1 billion tender for 30 days and a RM500 million tender for 92 days.
The central bank 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.
At 4 pm, BNM will conduct up to RM48.3 billion conventional overnight tender and RM28.5 billion for Murabahah overnight tender.
Foreign exchange rates
Following are the opening Malaysian foreign exchange for major currencies today:
1 USD 4.6485/6525
100 yen 3.2810/2840
1 pound 5.9310/9361
1 euro 5.0743/0787
1 SGD 3.4582/4617
100 baht 13.3340/3505
1 mln rupiah 309.7/310.2
100 pesos 8.36/8.37
Gold down
The physical price of gold as at 9.30 am stood at RM280.17 per gramme, down RM1.52 from rm281.69 at 5 pm yesterday.. – BERNAMA
