Ringgit strengthens against US dollar as softer US inflation eases Federal Reserve rate concerns
KUALA LUMPUR: The ringgit extended its gains against the US dollar at Thursday’s close as investors responded positively to softer-than-expected United States inflation data, reinforcing expectations that the Federal Reserve may refrain from raising interest rates in the near term.
The improved outlook for US monetary policy helped lift sentiment across Asian foreign exchange markets, with regional currencies broadly benefiting from renewed investor appetite for emerging market assets.
The local currency ended the trading session at 4.0710/4.0745 against the US dollar, improving from 4.0760/4.0805 recorded at Wednesday’s close.
The appreciation followed the release of June inflation figures in the United States, which came in below economists’ forecasts and strengthened market expectations that inflationary pressures are gradually easing.
Bank Muamalat Malaysia Bhd Chief Economist Dr Mohd Afzanizam Abdul Rashid said weaker readings for both the US Consumer Price Index (CPI) and Producer Price Index (PPI) have reduced concerns that the Federal Reserve will need to tighten monetary policy further in the immediate future.
He explained that lower energy prices, particularly the decline in crude oil during June, contributed to the moderation in inflation, providing additional reassurance to financial markets.
According to him, investor confidence was also supported by comments from Federal Reserve Chair Jerome Powell during his testimony before the US Senate Banking Committee, where he signalled that policymakers were not under pressure to raise the benchmark federal funds rate in the near term.
The combination of easing inflation and a less aggressive policy outlook weakened demand for the US dollar, allowing regional currencies, including the ringgit, to post modest gains.
While the ringgit strengthened against the greenback, its performance against other major international currencies remained mixed as investors continued to reposition their portfolios amid changing global monetary policy expectations.
The local currency depreciated against the British pound, closing at 5.4987/5.5034 compared with 5.4578/5.4638 on Wednesday.
It also weakened against the euro to 4.6678/4.6718, from 4.6536/4.6587 previously.
Against the Japanese yen, however, the ringgit recorded a marginal improvement, ending at 2.5102/2.5125 compared with 2.5103/2.5132 a day earlier.
Trading against regional currencies also produced mixed results despite the generally positive sentiment across Asian markets.
The ringgit slipped slightly against the Singapore dollar to 3.1583/3.1612, from 3.1546/3.1583 previously.
It also weakened against Indonesia’s rupiah, trading at 226.3/226.6 compared with 225.5/225.9, while easing marginally against the Thai baht to 12.1247/12.1399 from 12.1198/12.1371.
The only regional gain came against the Philippine peso, with the ringgit strengthening to 6.60/6.61, compared with 6.61/6.62 at the previous close.
Market analysts said investors will continue to monitor upcoming US economic indicators and future Federal Reserve communications for further clues on the direction of interest rates, with any additional evidence of moderating inflation likely to support emerging market currencies.
They added that the ringgit’s near-term trajectory will also depend on global commodity prices, geopolitical developments, capital flows and broader investor risk sentiment, all of which remain key factors influencing currency markets amid an uncertain global economic environment.
