KUALA LUMPUR: The ringgit opened slightly higher against the US dollar in early trade as the dollar retreated, sparked by a report hinting at gradual tariff implementations and data showing an unexpected dip in US wholesale inflation, said an analyst.
At 8 am, the ringgit traded at 4.5000/5080 against the greenback versus 4.5035/5100 at yesterday’s close.
SPI Asset Management managing partner Stephen Innes said the dollar retreated from its lofty perch, marking its first decline in six sessions.
“A strategic report hinting at gradual tariff implementations and fresh data showcasing an unexpected dip in US wholesale inflation, contributing to a recalibration of extended long-dollar positions at unseen levels since 2019.
“Hence, the crowded trade makes the dollar extremely sensitive to downside economic surprises,” he told Bernama.
US President-elect Donald Trump’s economic team is reportedly considering a gradual tariff increase of two per cent to five per cent per month under the International Emergency Economic Powers Act.
Innes said investors are cautious on Wednesday’s critical US consumer price inflation report, as forecasts suggest an uneasy three per cent December inflation rate, but when annualised, alarmingly hint at rates edging towards four per cent.
“This unsettling preview starkly contrasts with the US Federal Reserve’s (Fed) late 2024 projections, throwing a cold splash on rate cut hopes and catapulting treasury yields towards the daunting five per cent mark. It is a stark reminder of the volatile financial landscape that awaits just beyond the horizon,” he noted.
Meanwhile, Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the ringgit could be stuck at the current trajectory of around RM4.50 to RM4.51 until there is more clarity on the global policy direction.
He noted that the US dollar is going positive in the near term as the market expectation towards US interest rates is shifting from lower rate cuts to no change in the policy rate.
“The US Dollar Index (DXY) continued to trend lower to 109.273 points since the news of a possible measured pace of US tariff hike broke out on Monday.
“The latest US Producer Price Index (PPI) print still points to an elevated inflation rate with the recent outturn in December showed headline PPI accelerated to 3.3 per cent from 3.0 per cent in the prior month while the core PPI sustained at 3.5 per cent for the second month in a row after rising by 3.4 per cent in October,” he said.
Mohd Afzanizam noted that the uncertainties over the incoming administration in the White House also add to the degree of uneasiness by the market, resulting in a growing appetite for the US dollar.
Meanwhile, the ringgit opened mixed against major currencies.
It strengthened versus the Japanese yen to 2.8474/8526 from yesterday’s close of 2.8510/8553, but it fell vis-a-vis the euro to 4.6373/6455 from 4.6201/6268 and weakened against the British pound to 5.4941/5038 from Tuesday’s close of 5.4839/4918.
The local note traded mixed against ASEAN currencies.
The ringgit advanced versus the Philippines’ peso to 7.67/7.69 from 7.68/7.70 and was higher vis-a-vis the Indonesian rupiah at 276.5/277.2 from 276.7/277.3 recorded at yesterday’s closing.
It declined versus the Thai baht to 12.9687/13.0003 from 12.9500/9739 and fell against the Singapore dollar to 3.2916/2977 compared with 3.2889/2939 at yesterday’s close.
