SPI Asset Management managing director Stephen Innes said the ringgit weakened in line with broader moves in Asia FX and the G-10 space following improved ISM manufacturing data in the US, which bolstered dollar interest rate differentials to their most favourable levels this year.
“However, the bad news for the ringgit came from the prices paid component, which rose to 55.8 from 52.5, raising concerns about sticky inflation.
“This development reduced the odds of a June Federal Reserve (Fed) rate cut from 70% to 55%, which was bullish for the US dollar,” he added.
He noted that the worry about persistent inflation was compounded by existing supply chain disruptions, including those in the Red Sea and the recent shutdown of the Baltimore Port, along with the gradual increase in oil prices.
Despite the soaring oil prices, commodity currencies like the ringgit found little joy as the US dollar regained strength, and given the US is one of the largest oil producers globally, higher oil prices also benefitted the US dollar, he pointed out.
“Given the strength of recent US economic data, it is increasingly challenging to anticipate any renewed dovishness from the plethora of Fed speakers scheduled this week.
“Therefore, any potential pullback in the strength of the US dollar will likely be driven by incoming economic data,” he added.
At 6pm, the ringgit slipped to 4.7515/4.7535 against the greenback from Monday’s close of 4.7285/4.7325.
The local currency was also traded lower against a basket of major currencies.
It depreciated against the euro to 5.1036/5.1057 from 5.1002/5.1045 at Monday’s close, weakened vis-a-vis the British pound to 5.9717/5.9742 from 5.9674/5.9729, and was also lower versus the Japanese yen at 3.1326/3.1339 from 3.1232/3.1260 previously.
The ringgit was traded mostly lower against Asean currencies except against the Thai baht.
The local currency slipped against the Singapore dollar to 3.5134/3.5151 from 3.5054/3.5087 at the last close and slid vis-a-vis the Indonesian rupiah to 298.9/299.1 compared to 297.4/297.8 previously.
It was also easier versus the Philippine peso at 8.43/8.44 from 8.40/8.41 on Monday but improved versus the Thai baht to 12.9659/12.9771 from 12.9793/12.9949.