THE ringgit extended its downtrend against the US dollar this morning, breaching the 4.6 level as the greenback continues to strengthen on expectation of an interest rate hike in the United States.

At 9am, the local note traded at 4.6090/6130 against the greenback compared with yesterday’s close of 4.5920/5950.

Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said the US’ equities market ended lower yesterday while Treasury yields were higher, suggesting traditional assets were badly hit by the debt impasse and uncertainties over future interest rate hikes by the Federal Reserve (Fed).

He said the Federal Open Market Committee (FOMC) meeting minutes suggested members were divided over raising the policy rate, but were unanimous in their decision to keep raising it by 25 basis points.

“The US debt ceiling is still wobbly as politicians might cause a delay in the decision, given the polarised political landscape in the US. Consequently, the US Dollar Index rose 0.39% to 103.889.

“Against such a backdrop, the ringgit-US dollar will remain weak today as market participants will stay defensive,” he told Bernama.

Afzanizam said the higher-than-expected UK) inflation rate, which came in at 8.7% in April versus consensus estimates of 8.2%, suggested global central banks are likely to remain guarded.

He said the risk-off mode has been exacerbated by China’s recent announcement on banning the use of micron chips and the communique by the G7 last weekend on the war in Ukraine.

On the local front, he said the ringgit is less in favour as market players believe Bank Negara Malaysia is almost done with overnight policy rate hikes.

As such, the ringgit traded mostly lower against a basket of major currencies this morning.

It rose against the Japanese yen at 3.3056/3087 from 3.3148/3172 at yesterday’s close but eased vis-a-vis the British pound to 5.6981/7031 from 5.6877/6914, and weakened against the euro to 4.9547/9590 from 4.9470/9502. 

The local note traded mostly lower against other Asean currencies. 

The ringgit surpassed a two-decade low against the Singapore dollar at 3.4131/4163 from 3.4091/4115 at yesterday’s close, depreciated versus the Indonesian rupiah to 309.2/309.7 from 308.1/308.5, and slipped against the Philippines’ peso to 8.26/8.28 from 8.23/8.24. 

However, it strengthened vis-á-vis the Thai baht at 13.2897/3066 from 13.2924/3073 yesterday. – Bernama, May 25, 2023.