Ringgit extends gains as greenback falls on possible Fed tapering

KUALA LUMPUR: The ringgit extended yesterday’s gains to open higher against the US dollar today, as the greenback continued to weaken in reaction to a statement from the United States Federal Reserve (Fed).

The market had taken note of the speech by Fed chair Jerome Powell which indicated that a stronger and long-lasting inflation was a real possibility, dealers said.

At 9 am, the local note rose to 4.2020/2065 against the greenback from 4.2025/2055 at Tuesday’s close.

Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said the US dollar had weakened despite Powell’s hawkish tone when he debriefed the Senate Banking Committee, which indicated that the tapering process could be sped up should economic data points to a more sustainable recovery.

"The Fed chair, however, put a caveat as scientists are learning more about the latest COVID-19 variant.

"This means that they might change their tack should the latest variant prove to be more harmful and transmissible,” he told Bernama.

Mohd Afzanizam said the US dollar Index (DXY) saw a quite substantial correction, falling below 96 points, and added that the ringgit should stay well supported, taking its cue from the latest greenback depreciation.

"The way we see it, it is a technical correction following the overbought condition in the US dollar,” he added.

ActivTrades trader Dyogenes Rodrigues Diniz said the US dollar fell sharply against the ringgit on Wednesday, noting that the bearish tone was expected following the extensive bullish movement that began on November 1.

"From a technical standpoint, if the pair fails to break the support at 4.1940, there is a good chance that the US dollar will resume its bullish trend over the next few days.

"If the price breaks below 4.140, the next major area of support will be at around 4.1050,” he said.

The local note was also traded mostly higher versus a basket of major currencies at the opening, except against the Singapore dollar.

It rose versus the British pound to 5.5874/5934 from 5.6158/6198 at Tuesday's close and improved vis-a-vis the euro to 4.7613/7664 from 4.7753/7787 yesterday.

The ringgit also increased against the Japanese yen to 3.7107/7150 from 3.7230/7260 on Tuesday, but depreciated versus the Singapore dollar to 3.0784/0821 from 3.0743/0769 previously . - Bernama
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