KUALA LUMPUR: The ringgit extended its gains against the US dollar as the greenback faced downward pressure with the US Federal Reserve on course to reduce interest rates in September.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid noted that the US Dollar Index (DXY) remains around 101 points, indicating weaker demand for the dollar.
At 6 pm, the ringgit strengthened to 4.3750/3830 against the US dollar compared with 4.3780/3850 at the close on Tuesday.
He noted that there is also concern over US employment data, which is expected to be revised downward. If this occurs, it will confirm the underlying weakness of the US economy.
This situation strengthens the argument for monetary easing if the Fed aims to achieve a soft landing for US economic growth.
"My view is that, on one hand, markets are optimistic that the Fed will cut rates soon, which would support the economy.
"On the other hand, if the Fed delays lowering the Federal Funds Rate, the risk of a US recession will increase, leading to higher demand for safe-haven currencies like the greenback," he told Bernama.
Mohd Afzanizam said it is a wait-and-see situation, and Fed chairman Jerome Powell's speech at the Jackson Hole Symposium on Friday should provide clarity.
"For now, the ringgit appears to be in a positive position and the Malaysian economy is performing well, which should strengthen the ringgit's standing," he said.
At the close, the ringgit traded lower against a basket of major currencies.
The local currency slipped against the Japanese yen to 2.9943/3.000 from 2.9917/9967, dropped vis-a-vis the euro to 4.8637/8726 from 4.8491/8568 and depreciated against the British pound to 5.6993/7097 from 5.6927/7018 previously.
Meanwhile, the ringgit was traded mostly higher against ASEAN currencies.
The local note strengthened against the Singapore dollar to 3.3456/3519 from 3.3466/3522 at Tuesday’s close, rose versus the Indonesian rupiah to 282.2/282.9 from 283.5/284.2 and gained vis-a-vis the Thai baht to 12.7373/7676 from 12.7982/8254 previously.
It was, nevertheless, weaker against the Philippine peso at 7.74/7.76 from 7.74/7.75. - Bernama
