Dollar weakens on Fed debate over rates, giving ringgit room to firm at open

KUALA LUMPUR, July 9 — The ringgit opened firmer against the US dollar on Thursday as the greenback weakened after the release of minutes from the US Federal Open Market Committee (FOMC) meeting.

At 8am, the local currency strengthened to 4.0730/0800 against the US dollar from 4.0750/0800 at Wednesday’s close.

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the US Dollar Index (DXY) edged lower after the FOMC minutes showed Federal Reserve (Fed) officials remained divided over the future path of interest rates.

“The minutes clearly showed a wider divide among Fed officials over the direction of future interest rates, with discussions centred on whether to keep rates unchanged or raise them.

“The Fed is no longer considering interest rate cuts. Instead, officials are debating whether to maintain the current rate or increase it further, underscoring their continued focus on containing inflation,” he told Bernama.

Mohd Afzanizam said several Fed officials viewed the current federal funds rate of 3.50 per cent to 3.75 per cent as restrictive.

“As a result, the US dollar softened, giving Asian currencies, including the ringgit, room to strengthen today,” he said.

He said investors would also focus on Bank Negara Malaysia’s (BNM) Monetary Policy Committee (MPC) decision later today, with the Overnight Policy Rate (OPR) expected to remain unchanged at 2.75 per cent.

“More importantly, the market will be looking for BNM’s latest assessment of the economy amid heightened uncertainties in West Asia,” he said.

At the opening, the ringgit traded mostly lower against a basket of major currencies.

It fell against the British pound to 5.4554/4648 from 5.4369/4435 at Wednesday’s close and weakened against the euro to 4.6518/6598 from 4.6471/6528. It, however, strengthened against the Japanese yen to 2.5058/5103 from 2.5083/5114.

Against regional currencies, the local note traded mostly higher.

It edged up against the Singapore dollar to 3.1486/1542 from 3.1487/1528 at Wednesday’s close and appreciated against the Indonesian rupiah to 226.1/226.5 from 226.2/226.5. It, however, slipped against the Thai baht to 12.1691/1959 from 12.1685/1882.

The ringgit was unchanged against the Philippine peso at 6.62/6.64. — Bernama