Ringgit appreciates against US dollar at close on China's reopening

KUALA LUMPUR: The ringgit rebounded to close higher against the US dollar on Monday following optimism about China’s economic reopening, said an analyst.

At 6 pm, the local note appreciated to 4.3720/3765 against the US dollar from last Friday’s close of 4.4005/4070.

SPI Asset Management managing partner Stephen Innes told Bernama that the U-turn in China's COVID-19 policy is consequential to economic growth, which has led to the strengthening of Asian currencies.

"With the lifting of border restrictions between China, Hong Kong, Macau, and international travel reopening, travellers are not only in a celebratory mood, but so are the Asian forex markets.

"Both currencies of Malaysia, as a prime Chinese tourist destination, and neighbouring Thailand, traded well today on the back of the China border reopening bounce," he said.

Meanwhile, Bank Islam Malaysia Bhd chief economist Firdaos Rosli said the local note benefitted from the lower US dollar index, which retreated to the 103 level last Friday, despite the hawkish tone set in the recently released Federal Open Market Committee's meeting minutes.

He said the positive US job market data also suggested that the Federal Reserve’s (Fed) efforts in taming inflation are far from over, although US inflation has moderated since mid-2022.

"Despite the encouraging job data that came in better than expected, wage growth in the world’s largest economy has started to moderate, which could prompt the Fed from being overly aggressive in its coming rate hikes.

"As it stands, we expect the central bank to proceed with two consecutive 25-basis point hikes in the first two meetings of the new year," he said.

Coupled with China's positive near-term economic outlook and the US’ slower wage growth, Firdaos believes that such sentiment would spill over to Malaysia, reigniting interest in the local currency.

The market would keep an eye out for the upcoming release of the US inflation figure, due this Thursday, he said.

"We expect it to moderate amid weaker global oil prices in December, easing worries over the Fed’s monetary policy path.

"For this week, we foresee the ringgit to trade between 4.37 and 4.39," he said.

However, the ringgit traded lower against a basket of major currencies.

It declined against the British pound to 5.3124/3179 from 5.2159/2336 at Friday’s close and depreciated against the euro to 4.6636/6684 from 4.6254/6322.

The local currency also weakened versus the Singapore dollar to 3.2793/2832 from 3.2664/2717 and dropped vis-a-vis the Japanese yen to 3.3009/3045 from 3.2739/2793 previously. - Bernama