Ringgit gains against US Dollar amid global market uncertainty

[MALAYSIA] The ringgit rose versus the US dollar at the outset on Friday, as the US Dollar Index (DXY) remained below 100 points amid ongoing concern over US-China trade tensions.

Market analysts note that the DXY's subdued performance reflects broader investor caution, as mixed signals from the Federal Reserve on future interest rate hikes continue to weigh on the greenback. While inflation in the US has shown signs of easing, robust labour market data has kept expectations of further monetary tightening alive, creating a tug-of-war in currency markets.

At 8 a.m., the local currency was trading at 4.3995/4150 against the US dollar, up from 4.4050/4095 at the closing on Thursday. Dr Mohd Afzanizam Abdul Rashid, chief economist of Bank Muamalat Malaysia Bhd, said the ringgit rose 0.08 percent to RM4.4073 against the US dollar on Thursday, tracking the lower DXY.

"Given the current weakness in the greenback, the US dollar-ringgit pair is expected to remain around the RM4.40 level," the analyst told Bernama.

The ringgit's performance is also being influenced by domestic factors, including Malaysia's recent trade data, which showed a stronger-than-expected surplus in June. This has bolstered confidence in the local economy, providing additional support for the currency. However, lingering concerns over global growth slowdown and commodity price volatility remain key risks to watch.

He said the most recent US initial unemployment claims statistics fell to 215,000 last week, demonstrating relative resilience in the US labor market despite persistent economic uncertainty. Meanwhile, the ringgit traded mainly down against a basket of major currencies.

Regional currency movements have been mixed, with Asian currencies facing pressure from China's slower-than-anticipated economic recovery. The yuan's recent weakness has had a spillover effect on neighbouring currencies, though the ringgit has managed to hold its ground better than peers due to steady demand for Malaysian exports.

It fell against the Japanese yen to 3.0893/1019 from 3.0849/0883 on Thursday, depreciated against the British pound to 5.8368/8574 from 5.8331/8391, and increased against the euro to 5.0027/0203 from 5.0102/0154.

The local currency outperformed most ASEAN currencies. It rose slightly against the Singapore dollar to 3.3548/3705 from 3.3562/3601 and strengthened against the Thai baht to 13.1651/2491 from 13.2211/2417. The ringgit was firmer against the Indonesian rupiah at 261.3/262.4 compared to 261.6/262.0, while it climbed against the Philippine peso to 7.76/7.80 vs 7.77/7.79.

Looking ahead, traders will be closely monitoring the Federal Reserve's policy meeting next week for further clues on the US interest rate trajectory, which could set the tone for emerging market currencies like the ringgit. Any hints of a prolonged pause in rate hikes may provide additional upside for the local currency in the near term.