KUALA LUMPUR, Nov 4 — The ringgit opened flat against the US dollar this morning as investors opted for a wait-and-see attitude as the rate hike expectation has been factored in, a dealer said.
At 9 am, the local currency stood at 4.7425/7465, unchanged against the greenback from Thursday's close of 4.7425/7460.
Hong Leong Investment Bank (HLIB) Research opined that the continuous Fed Funds Rate (FFR)-Overnight Policy Rate (OPR) spread widening could lead to continued ringgit weakness.
It said a widening of FFR-OPR spread, which rose from +63 basis points (bps) to +113 bps, is broadly negative for the FBM KLCI (-58 per cent correlation) and possible further weakness in ringgit.
"As such, we expect the US dollar versus ringgit to average at 4.44 in 2022 and 4.80 at year-end," HLIB Research said in a note today.
Bank Negara Malaysia (BNM) raised the OPR by 25 bps to 2.75 per cent, the fourth consecutive hike since May this year, as the central bank’s Monetary Policy Committee decided to further adjust the degree of monetary accommodation.
Previously, the US Federal Reserve (Fed) announced another large 75 bps hike on Wednesday, pushing the FFR higher to a range of 3.75 to four per cent.
Meanwhile, ActivTrades trader Dyogenes Rodrigues Diniz said the US dollar reached its highest level since January 1998 but shortly after that level was reached, the ringgit moved higher on the back of BNM's decision.
Diniz said BNM has maintained a slow but steady pace of interest rate hikes over the past few meetings to contain inflation.
"The predictability of the interest rate increase has allowed the US dollar against ringgit to rise over the last few months, as the hike pace of the US Fed has been much more aggressive than the interest rate increases announced for the ringgit," he said.
The ringgit ended at a fresh all-time low against the US dollar on Thursday due to weak sentiment amid the strengthening greenback.
Today, the ringgit was traded mixed against a basket of major currencies.
The local note appreciated against the British pound to 5.3040/3085 from 5.3372/3411 at Thursday's close and strengthened against the euro to 4.6249/6288 from 4.6258/6292 previously.
However, it depreciated against the Singapore dollar to 3.3363/3395 from 3.3353/3383 and decreased vis-a-vis the Japanese yen to 3.2001/2030 from 3.1992/2018 yesterday.
— Bernama
