A dealer attributed the flat opening to investors opting for a wait-and-see attitude as the rate hike expectation had been factored in.
At 9am, the local currency stood at 4.7425/4.7465, unchanged against the greenback from yesterday’s close of 4.7425/4.7460.
Hong Leong Investment Bank (HLIB) Research expressed the view that the continuous widening of the spread between the fed funds rate (FFR) and overnight policy rate (OPR) could lead to continued ringgit weakness.
It said a widening of the FFR-OPR spread, which rose from 63 basis points (bps) to 113bps, was broadly negative for the FBM KLCI (-58% correlation) and could possibly weaken the ringgit further.
“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 25bps to 2.75%, 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 75bps hike on Wednesday, pushing the FFR higher to a range of 3.75% to 4%.
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 had 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 enabled the US dollar to gain against the ringgit 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 yesterday 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 5.3040/5.3085 from 5.3372/5.3411 at yesterday’s close and strengthened against the euro to 4.6249/4.6288 from 4.6258/4.6292 previously.
However, it depreciated against the Singapore dollar to 3.3363/3.3395 from 3.3353/3.3383 and decreased vis-a-vis the Japanese yen to 3.2001/3.2030 from 3.1992/3.2018 yesterday.