Ringgit Opens Firmer Against the US Dollar as DXY Remains Muted
The Malaysian ringgit started the day on a firmer footing against the US dollar, opening at 4.4675/4.4745, compared to the previous day’s close of 4.4680/4.4725. This slight gain came despite a higher-than-expected US inflation report, which had the potential to strengthen the greenback.
Why Did the Ringgit Strengthen?
The US consumer price index (CPI) for January recorded a rise of 3.0%, while the core CPI climbed 3.3%, both surpassing market expectations of 2.9% and 3.1%, respectively. However, the US Dollar Index (DXY) remained largely unmoved, providing some breathing space for the ringgit. This suggests that despite inflationary pressures, the market sentiment towards the US dollar remained neutral, allowing the ringgit to gain marginally.
US Federal Reserve’s Influence on the Market
According to Bank Muamalat Malaysia Bhd chief economist Afzanizam Rashid, the recent inflation data further reinforced expectations that the US Federal Reserve (Fed) is not in a hurry to cut interest rates. Fed Chair Jerome Powell emphasized that achieving price stability remains a priority, signaling that the central bank will maintain its cautious stance on monetary policy. This outlook implies that the US dollar may continue to hold its strength, which could limit the ringgit’s upside in the near future.
What’s Next for the Ringgit?
While the ringgit has managed to open stronger, its future trajectory remains uncertain. The Fed’s interest rate policy and potential US trade policy changes could influence the demand for the US dollar, indirectly affecting the ringgit’s performance. For now, investors should keep an eye on further economic data releases and global market trends to anticipate the currency’s movement. Despite a muted DXY, the ringgit saw slight gains against the US dollar, reflecting a cautious market reaction to US inflation data. However, with the Fed’s firm stance on interest rates, the local currency’s long-term strength will depend on broader economic and policy developments. Investors should remain vigilant and stay informed about the latest financial trends.
Source: Free Malaysia Today
