Strong US economic data drags ringgit lower

 

KUALA LUMPUR: The ringgit opened lower this morning against the US dollar as the greenback strengthened on the back of strong US economic data, increasing the likelihood that US interest rates will stay higher for longer.

The US weekly initial jobless claims data that ended on June 24 fell to 239,000 new claims, beating analysts’ estimates of 265,000 while its GDP edged upward to 2%, from 1.3% previously, beating expectations for a slim gain of 1.4%, dealers said.

SPI Asset Management managing director Stephen Innes said the ringgit is expected to trade on a weaker bias today due to the stronger-than-expected US jobs claims which support an interest rate hike in July and possibly beyond.

He reckons that foreign exchange (FX) traders are trying to determine how much further rates would need to rise in each “jurisdiction”.

“However, with the US Federal Reserve (Fed) chairman Jerome Powell talking tough on inflation last Wednesday, hinting at multiple interest rate increases ahead and possibly at an aggressive pace, the dollar is clawing back lost ground from earlier this week.

“Traders are positioning for the Fed’s preferred inflation (gauge), the US personal consumption expenditures (PCE) report to be released later tonight. If inflation remains slow to normalise, that too will strengthen the dollar,” he told Bernama.

At 9am, the local unit fell to 4.6835/4.6895 versus the greenback compared to 4.6705/4.6740 at Wednesday’s close.

The market was closed for the Hari Raya Aidiladha holiday yesterday.

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

It rose vis-a-vis the euro to 5.0928/5.0994 from 5.1128/5.1166 at Wednesday’s close, strengthened against the Japanese yen to 3.2338/3.2382 from 3.2427/3.2454 and increased versus the British pound to 5.9101/5.9177 from 5.9292/5.9336 previously.

However, the local note was traded mixed against other Asean currencies.

The ringgit inched up against the Singapore dollar to 3.4549/3.4599 versus 3.4550/3.4581 on Wednesday and improved to 8.43/8.46 against the Philippine peso from 8.45/8.46.

It fell versus the Indonesian rupiah at 312.3/312.9 from 311.4/311.9 and slipped against the Thai baht to 13.1382/1606 from 13.1054/1211 on Wednesday. - FMT