The ringgit opened higher against the US dollar on Wednesday, supported by the weakness of the United States (US) currency and the decline in US Treasury bond yields.
At 10am, the ringgit was trading at RM4.0260, up 0.45% at the Asian open on Wednesday.
According to Bank Muamalat Malaysia Bhd Chief Economist Dr Mohd Afzanizam Abdul Rashid, long-term US bond yields continued to be the focus of the market as the yield on the 30-year US Treasury securities fell six basis points to 5.17%.
US Bond Yields Continue to Be in Focus
The decline in bond yields followed reports that the US Treasury Department may use the Treasury General Account (TGA), which is cash funds held at the US Federal Reserve (Fed), to fund its bond repurchase program.
The move is seen as an effort to reduce upward pressure on long-term bond yields.
Following this, the US Dollar Index (DXY) fell 0.10% to 98.905 points, giving the Ringgit some room to strengthen.
Afzanizam said the development could potentially support the Ringgit as US authorities are not seen to be inclined towards a higher interest rate environment.
Markets Await Fed Signals
However, uncertainty over the direction of the Fed's monetary policy remains.
The market will now be looking at Fed Chairman Kevin Warsh's speech at the Jackson Hole Symposium this week for clues on the direction of US interest rates.
Any signals regarding a cut or hike in interest rates could potentially affect the strength of the US Dollar and subsequently the ringgit's movements.
Ringgit Moves Mixed Against Major Currencies
At the opening of trade, the ringgit strengthened slightly against the Japanese Yen to 2.5360/5402 from 2.5380/5402 at Monday's close.
However, the ringgit weakened against the Pound Sterling to 5.5099/5187 from 5.5080/5128 and depreciated against the Euro to 4.7140/7215 from 4.7132/7173.
Against regional currencies, the ringgit strengthened against the Indonesian Rupiah to 227.8/228.2, rose against the Philippine Peso to 6.54/6.55 and strengthened against the Thai Baht to 12.3486/3753.
However, the ringgit weakened slightly against the Singapore Dollar to 3.1810/1836 from 3.1805/1835.
