Ringgit Appreciates Higher Due to Weaker US Economic Data

The ringgit strengthened against the US dollar at today’s opening following weaker economic data from the United States, reinforcing the view that the US economy is softening and suggesting a need for the Federal Reserve to ease monetary policy.

At 9 am, the ringgit appreciated to 4.7100/7130 against the greenback from Wednesday’s close of 4.7180/7210. “The ringgit could perform favourably today, possibly piercing the RM4.71 level on the back of weaker US economic data,” said Bank Muamalat Malaysia Bhd chief economist Afzanizam Rashid to Bernama.

To recap, the US released a series of economic data: the ISM Index for the services sector fell below the 50-point threshold to 48.8 points in June, and the New Orders sub-index dropped significantly to 47.3 points. Additionally, initial jobless claims were higher than anticipated, reaching 238,000 last week against consensus estimates, while the ADP employment report, which measures job creation in the private sector, fell to 150,000 in June from 157,000 a year ago, lower than the consensus estimate of 165,000.

The yields on 2- and 10-year US Treasury notes declined by four and seven basis points, respectively, to 4.71 per cent and 4.36 per cent. The US Dollar Index (DXY) also edged lower to 105.403 points last night from 105.722 points previously.

Meanwhile, the ringgit traded lower against a basket of major currencies. It retreated against the Japanese yen to 2.9180/9201 from yesterday’s close of 2.9149/9169. It breached the RM6.00 level, opening at 6.0057/0095 against the British pound from 5.9895/9933 at yesterday’s close, and weakened against the euro to 5.0835/0867 from 5.0737/0770 previously.

The ringgit also closed lower against its ASEAN peers except for the Indonesian rupiah. The local currency strengthened against the Indonesian rupiah at 287.6/288.0 from 288.1/288.5 but traded lower against the Singapore dollar at 3.4824/4849 from 3.4778/4803 at yesterday’s close and fell to 12.8653/8781 versus 12.8346/8466 against the Thai baht.