Ringgit eases vs dollar as US-Iran tensions weigh

KUALA LUMPUR: The ringgit opened higher against most major currencies but eased slightly against the US dollar on Friday as investors turned cautious amid escalating tensions between the United States and Iran, an economist said.

At 8am, the local currency eased slightly to 4.0430/4.0500 against the greenback from Thursday's close of 4.0425/4.0470, according to Bank Muamalat Malaysia Bhd chief economist Afzanizam Rashid, who spoke to Bernama.

Contents

01

US-Iran tensions weigh on sentiment

02

Treasury yields and Fed expectations

03

Ringgit's range and moves against major currencies

04

Mixed performance against regional currencies

05

Prior session: gains on US debt concerns

US-Iran tensions weigh on sentiment

Afzanizam said the US government was seeking to isolate Iran economically and was expected to announce such measures in the near term. He noted the development had led to a 1.75% increase in Brent crude prices to US$93.22 a barrel.

The main concern, he said, was how the US planned to isolate Iran economically and whether this would trigger further protectionist policies towards Iranian trade partners.

Treasury yields and Fed expectations

The US government was also expanding its efforts to buy back US Treasuries to suppress yields from rising, Afzanizam said, with the 30-year US Treasury yield rising six basis points to 5.25%.

In the previous session, the 30-year US Treasury yields had been hovering around 5.22% after exceeding 5.30% recently. Afzanizam said that move could mean the US Federal Reserve is less inclined to raise the Federal Funds Rate at its September Federal Open Market Committee meeting.

Ringgit's range and moves against major currencies

Afzanizam expected the ringgit to trade between RM4.04 and RM4.06 against the US dollar on Friday.

At the opening, the ringgit rose against the Japanese yen to 2.5445/2.5491, strengthened against the British pound to 5.5159/5.5254 and edged up against the euro to 4.7251/4.7332.

Mixed performance against regional currencies

The local note traded mixed against regional currencies at the opening. It rose against the Singapore dollar to 3.1797/3.1855 but fell against the Thai baht to 12.3120/12.3400. The ringgit was little changed against the Indonesian rupiah at 227.8/228.2 and almost flat against the Philippine peso at 6.56/6.57.

Prior session: gains on US debt concerns

The opening followed a Thursday session in which the ringgit closed higher against the US dollar as the US national debt surpassed US$40 trillion (RM162 trillion) for the first time. At 6pm on Thursday, the ringgit strengthened 140 pips to 4.0425/4.0470 against the US dollar from Wednesday's close of 4.0565/4.0610.

Afzanizam said direct intervention by the US government in the Treasury markets to stem the rise in long-term yields was the main driver in traders' sentiment. At Thursday's close, the ringgit slid against the Japanese yen to 2.5527/2.5557, fell against the British pound to 5.5164/5.5225 and eased against the euro to 4.7322/4.7374.