The anticipation of softer interest rate hikes going forward spurred the local currency to start the day 270 basis points higher.
It opened at 4.3300/4.3350 against the greenback, a level last seen in April 2022, from yesterday’s close of 4.3570/4.3615.
ActivTrades trader Dyogenes Rodrigues Diniz said the US consumer price index (CPI) data, an indicator of inflation, was in line with market expectations, at 6.5% year on year.
He said the market interpreted this as a signal that inflation is under control in the US, which might push the Federal Reserve (Fed) to slow down the pace of interest rate hikes in the second half of 2023.
“Many are now forecasting a 25-basis-point increase going forward. All of this points to a further depreciation of the US dollar in the short and medium term.
“With lower inflation and lower interest rates, investors look out for more attractive investment alternatives and could sell US dollars to buy riskier assets, such as stocks or other currencies,” Diniz told Bernama.
From a technical point of view, he said, the US dollar-ringgit has started to break through the support region at 4.3650 and it is possible that it will drop to as low as 4.30 over the next few days.
Meanwhile, an analyst said Malaysia’s positive economic figures, which had spurred buying interest for the ringgit, were also supported by China’s ongoing economic reopening.
It has been reported that China’s inflation remained moderate with the CPI rising by 1.8% in December from a year earlier, up from 1.6% in November, according to the National Bureau of Statistics.
The people’s republic’s inflation rate stood at 2% in 2022, below the official target of around 3%.
Meanwhile, the ringgit traded mostly lower against a basket of major currencies.
The local currency gained slightly against the Singapore dollar to 3.2751/3.2794 from 3.2764/3.2803 at yesterday’s close and declined against the euro to 4.6981/4.7035 from 4.6890/4.6938.
The ringgit fell vis-a-vis the Japanese yen to 3.3480/3.3524 from 3.3242/3.3281 but gained versus the British pound to 5.2852/5.2913 from 5.3033/5.3088 at yesterday’s close.