KUALA LUMPUR: The ringgit opened lower against the US dollar today ahead of Wednesday’s Federal Open Market Committee (FOMC) interest rate announcement.
As the US Federal Reserve is widely expected to raise interest rates by another 25 basis points, investors are looking forward to the accompanying statement to gauge the future outlook for rates.
At 9 am, the local note fell to 4.5705/5740 against the greenback compared with 4.5640/5690 at Monday’s close.
Bank Muamalat Malaysia Bhd chief economist and social finance head Dr Mohd Afzanizam Abdul Rashid said the possible rate hike would be given an edge to the US dollar as the differential between the Federal Funds Rate and overnight policy rate (OPR) is set to widen further, making US assets more attractive.
“Nonetheless, the final purchasing managers’ index (PMI) readings for various jurisdictions were lower in particular for the US manufacturing sector, indicating that manufacturers have become increasingly wary about their business prospects.
“This may have an impact on their decision on labour hiring and capital expenditure. So, the case for central banks to be not overly restrictive is building up,” he told Bernama.
On the home front, Mohd Afzanizam said the Bank Negara Malaysia (BNM) may keep the OPR steady at 3.00 per cent throughout the year as the real rate of interest has turned positive for the second month in a row to 0.6 per cent.
“The latest consumer price index (CPI) print for Malaysia came in lower at 2.4 per cent in June, suggesting that monetary policy is not excessively accommodative,” he said.
He expected the ringgit to range between 4.56 and 4.57 level versus the greenbcak today.
Meanwhile, the local unit traded mostly lower against a basket of major currencies.
It slipped vis-a-vis the euro to 5.0586/0625 from 5.0578/0634 at Monday’s close, and was almost flat against the British pound at 5.8576/8620 from 5.8556/8620 and was little changed versus the Japanese yen at 3.2305/2334 from 3.2307/2345 previously.
The local note traded mostly lower against other Asean currencies.
The ringgit slid vis-a-vis the Philippine peso to 8.38/8.39 from 8.35/8.37 yesterday, was easier against the Indonesian rupiah at 304.1/304.5 from 303.6/304.2, depreciated versus the Singapore dollar to 3.4316/4347 from 3.4287/4328, but improved against the Thai baht to 13.2363/2522 from 13.2417/2623 on Monday.
US dollar gains
The US dollar strengthened on Monday as the purchasing managers’ index (PMI) for the eurozone suggested worsening economic conditions, reported Xinhua.
The dollar index, which measures the greenback against six major peers, was up 0.27 per cent to 101.3418 in late trading.
Hamburg Commercial Bank (HCOB)’s flash composite PMI dropped to an eight-month low of 48.9 in July from June’s 49.9, the survey compiled by S&P Global showed early Monday.
The result is estimated to add to calls for the European Central Bank to stop raising interest rates after a quarter percentage point rate rise expected on Thursday.
“Manufacturing continues to be the Achilles heel of the eurozone. Producers have cut their output again at an accelerated pace in July, while the services sector’s activity is still expanding, though at a much slower rate than earlier in the year,” said analyst Cyrus de la Rubia of HCOB.
Britain’s economy is also slowing sharply. According to a separate PMI survey published on Monday, the index of British business activity in July fell to a seven-month low of 50.7, down from 52.8 in June.
In late New York trading, the euro fell to 1.1071 US dollars from 1.1124 dollars in the previous session, and the British pound decreased to 1.2824 US dollars from 1.2859 dollars in the previous session.
Meanwhile, the US S&P global manufacturing PMI improved to 49 in July’s flash estimate from 46.3 in June. Services PMI edged lower to 52.4 from 54.4 in the same period. Composite PMI declined to 52 from 53.2, pointing to an ongoing expansion in the private sector’s business activity.
Following the PMI data, 10-year US Treasury bond yield held steady at around 3.8 per cent.
The US dollar bought 141.4370 Japanese yen, lower than 141.8089 Japanese yen of the previous session. The US dollar rose to 0.8681 Swiss francs from 0.8661 Swiss francs, and it was down to 1.3166 Canadian dollars from 1.3202 Canadian dollars. The US dollar increased to 10.4154 Swedish Krona from 10.3879 Swedish Krona.
Short-term rates to 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 RM38.37 billion in the conventional system and RM28.44 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 a RM500 million tender for seven days as well as a RM800 million tender for 14 days.
BNM will also call for two reverse repo tenders, namely a RM1.5 billion tender for 31 days and a RM500 million tender for 92 days.
Additionally, the central bank will conduct a RM4 billion Bank Negara Interbank Bills Islamic (BNIBI) tender for 32 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.
At 4 pm, BNM will conduct up to RM39.4 billion conventional overnight tender and RM27.1 billion for Murabahah overnight tender.
Foreign exchange rates
Following are the opening Malaysian foreign exchange for major currencies today:
1 USD 4.5705/5740
100 yen 3.2305/2334
1 pound 5.8576/8620
1 euro 5.0586/0625
1 SGD 3.4316/4347
100 baht 13.2363/2522
1 mln rupiah 304.1/304.5
100 pesos 8.38/8.39
Gold down
The physical price of gold as at 9.30 am stood at RM278.58 per gramme, down RM1.07 from RM279.65 at 5 pm yesterday. – BERNAMA
