KUALA LUMPUR (Sept 23): The ringgit declined further against the US dollar at the opening bell today, following the US Federal Reserve’s (Fed) upbeat conclusion in the Federal Open Market Committee (FOMC) meeting yesterday, which could lead to an eventual hike in its policy rate, said an analyst.
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At 9am, the local note had depreciated to 4.1925/1955 from 4.1910/1950 at yesterday’s close.
Bank Islam chief economist Dr Mohd Afzanizam Abdul Rashid said the FOMC meeting was concluded with the Fed explicitly stating its intention to taper down its asset purchase programme soon.
“The FOMC members were of the view that the US economy had made good progress towards achieving its dual policy goals, including maximum employment and price stability,” he told Bernama.
More importantly, he said the Fed’s dot plots indicated that more participants were expecting higher interest rates next year, where the funds rate could be higher than 0.25% in 2022.
“The survey among the Fed’s members was also in line with the economic projection as the US’ 2022 gross domestic product (GDP) forecast was bumped up to 3.8% from 3.3% projected in June,” he said.
Mohd Afzanizam noted that the inflation rate projection was also revised upwards up to 2023, implying that the rate hike cycle would begin in 2022.
Consequently, the greenback is also strengthening against major currencies, he added.
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“As such, the ringgit could stay weaker today,” he said.
Similarly, ActivTrades trader Dyogenes Rodrigues Diniz said the scenario could cause the local note to slip over the next few days to the 4.2400 level, where it may encounter some selling pressure.
“Apart from that, the Consumer Price Index (CPI), which is due tomorrow, could bring some volatility to the market.
“If the CPI comes in below expectations, it could cause the ringgit to lose more value against the US dollar,” he said.
At the opening, the ringgit was traded higher against a basket of major currencies.
The ringgit increased versus the British pound to 5.7085/7126 from 5.7140/7195 at yesterday’s close, climbed vis-a-vis the Singapore dollar to 3.0948/0972 from 3.0996/1028, and appreciated to 4.8998/9033 versus the euro from 4.9156/9203 yesterday.
The local note also widened against the yen to 3.8162/8193 from 3.8270/8311 previously. -The Edge Markets