KUALA LUMPUR, July 23 — The ringgit closed slightly lower against the US dollar on Thursday as escalating tensions in West Asia fuelled expectations of a potential United States (US) interest rate hike, supporting the greenback.

At 6pm, the local currency eased to 4.0870/0910 versus the greenback from yesterday’s close of 4.0850/0890.

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said crude oil prices continue to charge higher, with the West Texas Intermediate (WTI) and Brent crude prices rising 3.19 per cent and 4.23 per cent to US$89.60 per barrel and US$98.05 per barrel, respectively.

“The re-escalation of military attacks in West Asia has elevated global oil supply concerns as the US-Iran peace negotiation looks increasingly fragile,” he told Bernama. 

He said the surge in oil prices has also raised questions over how global central banks would respond to the oil price shock, with some jurisdictions potentially resorting to tighter monetary policy to contain inflationary pressures.

“The odds for a US interest rate hike during the September meeting have also gone up. All this appears to have supported the US dollar, with US Dollar Index (DXY) increasing by 0.04 per cent to 101.169 points,” he added. 

Consequently, the ringgit moved within a narrow range today, oscillating around RM4.0833-RM4.0908 against the greenback.

Mohd Afzanizam noted that the European Central Bank (ECB) will announce its policy rate decision later today, with consensus expecting the benchmark interest rate to remain unchanged.

“However, the accompanying statement will be much more crucial as the market will observe the ECB’s policy stance in light of the latest developments in West Asia,” he added. 

Meanwhile, the ringgit traded mostly lower against a basket of major currencies at the close today.

It strengthened against the Japanese yen to 2.5015/5041 from 2.5057/5081 at Wednesday’s close, but depreciated vis-a-vis the euro to 4.6641/6686 from 4.6585/6631 yesterday, and went down versus the British pound to 5.4647/4701 from 5.4612/4666 previously.

The local currency also traded mostly lower against regional currencies.

It rose against the Indonesian rupiah to 227.8/228.1 from 228.0/228.3 at the close on Wednesday, but inched down versus the Singapore dollar to 3.1667/1701 from 3.1635/1668 yesterday, fell vis-a-vis the Thai baht to 12.0860/1021 from 12.0787/0944, and weakened against the Philippine peso to 6.62/6.63 from 6.61/6.62 at the previous close. — Bernama