Introduction to Currency Market
The ringgit has opened marginally higher against the US dollar on Tuesday. This slight increase is expected to be followed by cautious trading, especially with the upcoming Bank Negara Malaysia’s Monetary Policy Committee meeting on Thursday and the release of the US non-farm payrolls report on Friday.
Current Currency Standing
At the opening on Tuesday at 8am, the local currency stood at 4.2205/4.2300 against the greenback. This is a slight improvement from Friday’s closing level of 4.2230/4.2275. According to Bank Muamalat Malaysia Bhd chief economist Dr. Mohd Afzanizam Abdul Rashid, it is anticipated that the central bank will maintain the overnight policy rate (OPR) at 2.75 per cent. Dr. Mohd Afzanizam believes that the degree of monetary policy accommodation provided by the central bank is sufficient to support economic growth.
Global Economic Outlook
On the global front, the recent drop in the University of Michigan’s Consumer Sentiment Index (CSI) to 58.2 points in August has caught attention. This drop was below consensus expectations of 58.6 points and signifies a decrease from the average of 59.8 points in the first eight months of this year, down from 73.0 over the same period in 2024. This suggests that consumers have become more cautious about the state of the US economy. The upcoming US non-farm payrolls report on Friday will be closely watched, especially ahead of the Federal Reserve’s next interest rate decision on 17 September. Consensus estimates have put the non-farm payrolls at 74,000 in August, which is slightly higher than July’s 73,000.
Ringgit’s Performance
The ringgit is predicted to trade between 4.21 and 4.22 against the US dollar. Despite its firmer opening against the US dollar, the ringgit was mostly lower against a basket of major and regional currencies. It strengthened slightly against the Japanese yen but eased against the British pound and the euro. Among regional peers, the ringgit weakened against the Indonesian rupiah, the Singapore dollar, and the Thai baht, but firmed slightly against the Philippine peso.
Conclusion
In summary, the ringgit’s marginal increase against the US dollar on Tuesday sets a cautious tone for trading, influenced by upcoming key economic reports and policy meetings. The maintenance of the overnight policy rate and the global economic outlook, particularly the sentiment in the US, will play significant roles in determining the ringgit’s performance in the coming days. As the global economy continues to evolve, especially with the recent consumer sentiment index drop and the anticipated non-farm payrolls report, investors and traders will be closely watching these developments to make informed decisions.
