KUALA LUMPUR, Jan 30 ― The ringgit closed lower against the US dollar today derailed by a sudden spike in US bond yields, a dealer said.
At 6pm, the local note ended at 3.8975/8995 against the greenback from 3.8790/8840 on Monday.
Oanda Corp Head of Trading for Asia Pacific, Stephen Innes, said the higher US ten-year yield has triggered off risk reduction on short dollar positions.
“The rationale for the spike in rates probably lies somewhere between supply fears as both European Central Bank and the US Federal Reserve (Fed) are set to commence the weighty tasks of removing quantitative easing and speculation is seeping in that the US Federal Open Market Committee could deliver an upbeat statement with a more hawkish assessment of inflation,” he told Bernama.
He said the near-term direction for the US dollar would likely come early tomorrow morning when Fed Chairman, Janet Yellen, provided a statement on the Fed’s policy.
“If she indicates the Fed sees an uptick in inflation pressure, this could pressure US interest rates higher and strengthen the US dollar over the short term,” he said.
However, he said, since Bank Negara Malaysia has moved on a path of interest rate normalisation, the ringgit might be less sensitive to US yields than some of the other local low-yielding currencies.
“If that scenario plays out, then it will become a contest of economic data and if the Malaysian economy continues to outperform, then the ringgit should remain stable to stronger.
“Interest rates are only one part of the equation the other is equity inflow, and if the global economy environment remains risk friendly then that will support regional sentiment,” he said.
The ringgit was also lower against a basket of major currencies.
It fell against the Singapore dollar to 2.9711/9731 from Monday’s 2.9617/9667 and weakened versus the yen to 3.5869/5897 from 3.5656/5708 yesterday.
It went down against the euro to 4.8317/8358 from 4.8138/8216 yesterday and depreciated against the British pound to 5.4842/4889 from 5.4721/4799 on Monday. ― Bernama