Ringgit extends downtrend on stronger US dollar ahead of FOMC meeting


KUALA LUMPUR – The ringgit extended its downtrend against the US dollar on Monday on stronger buying support for the greenback as the market turns its focus on the upcoming US Federal Open Market Committee (FOMC) meeting on May 3 and 4, said an analyst.

At 9.00 am, the local note dipped to 4.3320/3365 versus the greenback from Friday’s close of 4.3230/3270.

Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said market players were anxious about the US Federal Reserve’s hawkish stance which would lead to a significant balance sheet run off, as well as aggressive interest rate increases.

“ The recent US Consumer Price Index (CPI) print, which shot up to 8.5 per cent year-on-year in March, may have implied that the Fed does want to be behind the curve in anchoring the inflation expectation.

“And therefore, the Fed Fund Rate would likely to be raised at a larger magnitude in the upcoming FOMC meeting,” he told Bernama.

Mohd Afzanizam said as for Malaysia, the inflation rate continued to be sustained at 2.2 per cent for two consecutive months in March 2022.

“This would suggest that the Bank Negara Malaysia may not be in a hurry to normalise its overnight policy rate (OPR) in the near term,” he added.

Meanwhile, SPI Asset Management managing partner Stephen Innes said the primary drivers for the ringgit will be a combination of high US yields, China’s economic woes and global recession fears.

“Asian currencies could move into a depreciation cycle, driven by a weaker yuan as the People’s Bank of China (PBoC) looks to export markets to offset domestic weakness,” he said.

Meanwhile, the ringgit was traded mostly higher against a basket of major currencies.

The local note rose versus the Japanese yen to 3.3644/3682 from Friday’s close of  3.3652/3686 yesterday but slid against the euro to 4.6794/6843 from 4.6710/6753.

It appreciated against the Singapore dollar to 3.1579/1614 from Friday’s close of 3.1633/1667 and increased vis-a-vis the British pound to 5.5549/5603 from 5.5641/5693.