KUALA LUMPUR, 8 Sept 2017:
The ringgit opened stronger against the US dollar today, inline with the regional currencies, on the weakness of the greenback amid unanticipated events at the US Federal Reserve.
At 9am, the local unit traded at 4.1865/1895 versus the greenback from yesterday’s 4.2080/2110 close.
A dealer said Asian currencies rose as investors saw the resignation of US Federal Reserve vice-chair Stanley Fischer as a sign that the US central bank will be even more cautious about raising interest rates again, implying further weakening of the US dollar.
Asian shares edged up as investors kept a wary eye on another US storm, while the US dollar skidded after European Central Bank (ECB) chief Mario Draghi suggested the bank may begin tapering its massive stimulus programme this autumn.
Wall Street ended little changed yesterday, as investors continued to tracking Hurricane Irma, which was bearing down on Florida on the heels of devastation in Texas caused by Hurricane Harvey.
Economists said Hurricane Harvey could weigh on US economic growth for the third quarter, though they did not expect this to delay the US Federal Reserve’s announcement of a plan at its meeting this month to start trimming its US$4.2 trillion debt portfolio.
The storm caused US initial jobless claims to spike to a two-year high, despite an underlying strength in the labour market.
“Economic conditions appear to warrant the continued removal of accommodation, and we think that will occur in two primary fashions, the first of which will be normalization of the balance sheet,” said Bill Northey, chief investment officer at US Bank Private Client Group based in Helena, Montana.
“But inflation has been stubbornly low and we’re not seeing a lot of material data to indicate that is changing.”
New York Fed president William Dudley yesterday said the central bank should continue gradually raising US interest rates, given low inflation should rebound – but sounding slightly less confident than his previous hawkish comments in the face of weak price readings.
The US dollar was also pressured by ECB head Draghi’s remarks that policymakers would decide on tapering this autumn, and that “probably the bulk of these decisions will be taken in October.”
The ECB must take into account the weakening of inflation owing to the strong euro as it prepares to wind down its stimulus, Draghi said, after the central bank kept rates at record lows at its regular policy meeting and confirmed that asset purchases would continue at least until December.
– Agencies