Ringgit ends lower after US Fed hints at rate hike

 Markets expect the Fed's inflation concern to make near-term monetary tightening almost inevitable at the September FOMC meeting, says analyst.

KUALA LUMPUR:

The ringgit ended lower against the greenback on the first trading day of September on rising expectations of a US interest rate hike after Federal Reserve (Fed) chair Kevin Warsh’s recent speech at the Jackson Hole Symposium.

At 6pm, the ringgit fell to 4.0370/4.0410 against the US dollar from last Friday’s close of 4.0230/4.0270.

Bank Muamalat Malaysia Bhd chief economist Afzanizam Rashid said Warsh’s speech at the Symposium last Friday has had a significant impact on the currency market.

“Markets are focusing on his concern over inflation, which would imply that the monetary tightening is almost inevitable in the near-term, especially during the Federal Open Market Committee’s (FOMC) two-day meeting beginning Sept 15,” he said.

The Symposium, which ran from Aug 27-29, was closely watched by investors for clues on the Fed’s next move on interest rates.

Afzanizam noted that the ringgit depreciated by 0.32% to RM4.0398 today, while other Asean currencies such as the Indonesian rupiah, Thai baht and Singapore dollar were also lower by 0.12%, 0.31% and 0.18% against the US dollar, respectively.

“Hence, the upcoming data point, such as the ISM manufacturing index, which will be published tonight, will be closely monitored. Consensus estimates pegged the ISM index to be at 55.2 points in August versus 55.6 points in July,” he added.

Against a basket of major currencies, the ringgit appreciated against the euro to 4.6801/4.6847 from 4.6828/4.6874 last Friday but weakened against the Japanese yen to 2.5223/2.5250 from 2.5193/2.5219.

It dipped against the British pound to 5.4657/5.4711 from 5.4632/5.4687.

The local currency traded mostly lower against regional currencies.

It declined against the Singapore dollar to 3.1703/3.1736 from 3.1652/3.1686 last Friday, slipped against the Philippine peso to 6.47/6.48 from 6.46/6.47 and gained against the Thai baht to 12.1315/12.1483 from 12.2087/12.2253.

The ringgit was also traded marginally lower against the Indonesian rupiah at 227.5/227.8 compared with 227.3/227.7 previously. - FMT