Ringgit Advances as Soft US Employment Data Boosts Expectations of Fed Policy Caution
KUALA LUMPUR, July 3 — The ringgit strengthened against the US dollar in early trading on Friday after weaker-than-expected US labour market data fuelled expectations that the Federal Reserve may refrain from tightening monetary policy in the near term.
The local currency opened at 4.0705/4.0805 against the greenback at 8.04am, improving from Thursday’s closing level of 4.0780/4.0830 as the US dollar weakened following the latest employment figures.
Investor sentiment shifted after the release of June’s US nonfarm payrolls report, which showed job creation falling well short of market expectations, prompting renewed speculation that the Federal Reserve could adopt a more measured approach to future interest rate decisions.
Bank Muamalat Malaysia Bhd Chief Economist Dr Mohd Afzanizam Abdul Rashid said the US economy added only 57,000 jobs in June, substantially below the consensus forecast of 114,000.
He added that employment figures for April and May were also revised lower, reinforcing signs that momentum in the US labour market has softened.
According to Mohd Afzanizam, the latest data reduces the likelihood of an immediate interest rate increase by the US central bank, a development that has weighed on the US dollar while supporting emerging market currencies, including the ringgit.
From a technical standpoint, he noted that the ringgit had previously entered oversold territory against the US dollar, suggesting there may still be room for additional appreciation if current market conditions persist.
The ringgit had already strengthened by approximately 0.33 per cent against the US dollar during Thursday’s trading session, closing around RM4.0805.
Based on prevailing market conditions, Mohd Afzanizam expects the US dollar-ringgit exchange rate to trade within the RM4.06 to RM4.07 range during Friday’s session.
The stronger opening was also reflected across the ringgit’s performance against other major international currencies.
Against the British pound, the Malaysian currency appreciated to 5.4296/5.4430, compared with 5.4401/5.4467 recorded at Thursday’s close.
The ringgit also strengthened against the Japanese yen, trading at 2.5214/2.5277 from the previous 2.5295/2.5327.
It posted modest gains against the euro as well, improving to 4.6497/4.6612, compared with 4.6526/4.6583 previously.
Regional currencies also saw the ringgit extend its positive momentum.
The local currency advanced against the Singapore dollar to 3.1483/3.1563 from 3.1517/3.1558 at the previous close.
It appreciated against the Indonesian rupiah to 226.2/226.8, compared with 226.6/226.9, while also strengthening against the Thai baht to 12.2384/12.2744 from 12.2411/12.2613.
Against the Philippine peso, the ringgit edged higher to 6.61/6.63, improving slightly from 6.62/6.63 previously.
Market participants are expected to continue monitoring incoming US economic indicators and Federal Reserve commentary for further signals on the interest rate outlook, with softer labour market conditions likely to remain a key driver of currency movements in the near term.
The latest jobs data has reinforced expectations that financial markets will continue to scrutinise US economic momentum, as any signs of slowing growth could influence global capital flows and provide additional support for regional currencies such as the ringgit.
