KUALA LUMPUR: The ringgit opened lower against the US dollar this morning, weighed down by strong US labour market data which increased chances that the Federal Reserve (Fed) would maintain its restrictive stance on monetary policy, said an economist.
At 9 am, the local unit fell to 4.6680/6725 versus the US dollar compared with 4.6580/6630 at Thursday’s close.
The latest ADP Nonfarm Employment Change data for the month of June reportedly rose higher-than-expected to 497,000 versus 228,000 forecast.
Bank Muamalat Malaysia Bhd chief economist and social finance head Dr Mohd Afzanizam Abdul Rashid said this might warrant the Fed to maintain its restrictive stance on monetary policy to bring down inflation towards its 2.0 per cent target.
“The US dollar should be well supported for as long as the market believes the Fed will continue its interest rate hike campaign,” he told Bernama.
In addition, tonight’s US data point is critical – the Nonfarm Payroll (NFP) – which is expected to go up by 339,000 in June based on consensus estimates from 225,000 in the preceding month.
As such, Mohd Afzanizam opined that the ringgit is likely to stay soft as the Fed is seen to be on track to deliver another 25 basis points (bps) hike in the upcoming Federal Open Market Committee (FOMC) meeting on July 25-26.
Meanwhile, the ringgit was traded lower against a basket of major currencies.
It declined vis-a-vis the euro to 5.0811/0860 from 5.0600/0654 at Thursday’s close, slipped against the Japanese yen to 3.2401/2434 from 3.2323/2359 and weakened against the British pound to 5.9433/9490 from 5.9310/9374 at the close yesterday.
The local note traded mixed against other Asean currencies.
The ringgit was down versus the Singapore dollar at 3.4496/4532 from 3.4458/4497 on Thursday’s close but rose against the Thai baht to 13.2335/2516 from 13.2881/3088.
It was almost flat against the Indonesian rupiah to 309.9/310.4 from 309.3/309.8 and flat against the Philippine peso at 8.39/8.40.
US dollar loses
The US dollar weakened on Thursday as it failed to beat resistance despite the labour market and service sector remaining on solid ground.
The dollar index, which measures the greenback against six major peers, was down 0.20 per cent to 103.1636 in late trading, Xinhua reported.
Data published by Automatic Data Processing (ADP) showed private sector employment in the United States rose by 497,000 in June, much higher than forecast consensus of 235,000 and 267,000 in the previous month.
US service purchasing managers’ index (PMI) increased to 53.9 in June, up from 50.3 in May, and the employment index rose to 53.1 from 49.2, showing an increase in the service sector payrolls, according to data issued by the Institute for Supply Management on Thursday.
However, the number of job openings in May stood at 9.8 million, which is below the market expectation of 9.93 million, according to the US Bureau of Labour Statistics’ (BLS) Job Openings and Labour Turnover Survey (JOLTS) unveiled on Thursday.
Meanwhile, Americans voluntarily left 4 million jobs in May, the Labour Department said Thursday. That marked a drop of around 500,000 from 4.5 million in November 2021, the highest level in Labour Department records back to 2000. A slowdown in voluntary departures can indicate a softening labour market if it reflects employers’ easing demand for workers, economists said.
“There’s just a lot of uncertainty right now in terms of how strong the economy is and what the Fed might have to do to try to deal with inflation pressures,” said James Ragan, director of wealth management research at D.A. Davidson.
The dollar eased after a brief rebound in the morning.
US Dollar Index continues its attempts to settle above the resistance at 103.25 to 103.45 as traders react to economic reports from the United States, noted Vladimir Zernov, analyst with market information supplier FX Empire.
In late New York trading, the euro increased to US$1.0881 from US$1.0853 in the previous session, and the British pound was up to US$1.2741 from US$1.2694 in the previous session.
The US dollar bought 144.1270 Japanese yen, lower than 144.6680 Japanese yen of the previous session. The US dollar was down to 0.8959 Swiss francs from 0.8989 Swiss francs, and it rose to 1.3353 Canadian dollars from 1.3280 Canadian dollars. The US dollar was down to 10.9443 Swedish Krona from 10.9464 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 RM45.70 billion in the conventional system and RM26.56 billion in Islamic funds.
Today, the central bank will call for two reverse repo tenders, namely a RM1 billion tender for 31 days and a RM500 million tender for 94 days.
Additionally, BNM will conduct a RM3 billion Bank Negara Interbank Bills Islamic (BNIBI) tender for 92 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 RM47.2 billion conventional overnight tender and RM26.2 billion murabahah overnight tender.
Foreign exchange rates
Following are the opening Malaysian foreign exchange for major currencies today:
1 USD 4.6680/6725
100 yen 3.2401/2434
1 pound 5.9433/9490
1 euro 5.0811/0860
1 SGD 3.4496/4532
100 baht 13.2335/2516
1 mln rupiah 309.9/310.4
100 pesos 8.39/8.40
Gold up
The physical price of gold as at 9.30 am stood at RM277.50 per gramme, down 62 sen from RM278.12 at 5 pm yesterday.– BERNAMA
