KUALA LUMPUR (June 1): The ringgit extended its downtrend to open lower against the US dollar on Wednesday (June 1) on a stronger US dollar Index (DXY) as the US Treasury went up amid fears of further acceleration of global inflation, said an analyst.
At 9am, the local currency had dropped to 4.3760/3820 versus the US dollar from Tuesday’s close at 4.3755/3780.
Bank Islam chief economist Dr Mohd Afzanizam Abdul Rashid said as investors turned to the default safe haven amid uncertainty, the ringgit would likely remain soft as market sentiments were much fixated towards the US Federal Reserve’s (Fed) move on interest rates.
“We believe fears of inflation and how the central bank would react via its benchmark interest rate were the key factors driving the markets,” he told Bernama.
Mohd Afzanizam noted that the US dollar gained strength in the final trading of May, with the DXY rising 0.12% to 101.786 points.
Beginning from June 1, the Fed will commence its plan to cut the size of its balance sheet, which currently stands at US$8.9 trillion. The 10-year US Treasury went up by 11 basis points to close at 2.84%.
The US Federal Open Market Committee will meet on June 14 and 15, with a half-percentage-point increase in the federal funds rate almost a given, Mohd Afzanizam said.
Meanwhile, the ringgit was traded mostly lower against a basket of major currencies.
The local note eased against the Singapore dollar to 3.1935/1983 from Tuesday’s close at 3.1929/1949 but increased vis-a-vis the Japanese yen to 3.3944/3993 from 3.4202/4222.
It moved lower versus the British pound to 5.5155/5231 from 5.5144/5176 on Tuesday and decreased versus the euro to 4.6933/6997 from 4.6923/6950.-BERNAMA