The Malaysian ringgit opened lower against the US dollar on Wednesday, following a rise in Brent crude oil prices that raised inflation concerns and reinforced expectations of a US Federal Reserve (Fed) interest rate hike.
At 10am, the ringgit was trading at RM4.0415, down 0.14% at the opening of the Asian session on Wednesday.
According to Bank Muamalat Malaysia Bhd Chief Economist Dr Mohd Afzanizam Abdul Rashid, the development of the conflict between the United States (US) and Iran remained the main focus of investors as geopolitical risks rose again.
Brent prices rose 0.78% to US$95.46 per barrel at the time of writing.
High Oil Prices Heighten Inflation Concerns
Rising crude oil prices have the potential to increase global inflationary pressures, especially if geopolitical tensions continue to affect energy supplies.
Concerns over higher inflation have also increased expectations that the Fed may raise interest rates at the September FOMC meeting.
According to Afzanizam, the probability of a US interest rate hike has now risen to 65%.
The expectation provided support to the US Dollar and in turn put pressure on the Ringgit.
US Dollar Strengthens Again
The US Dollar Index (DXY) rose 0.25% to 99.677 points, reflecting the strengthening of the US currency.
The strengthening US Dollar is expected to limit the Ringgit's potential upside in the near term.
Afzanizam expects the Ringgit to move cautiously around RM4.03 to RM4.05 against the US Dollar on Wednesday.
Ringgit Strengthens Against Major Currencies
Despite falling against the US Dollar, the Ringgit opened higher against several major currencies.
The Ringgit strengthened against the Japanese Yen to 2.5203/5245 from 2.5223/5250 at Tuesday's close.
The ringgit also rose against the Pound Sterling to 5.4561/4649 from 5.4657/4711 and strengthened against the Euro to 4.6800/6876 from 4.6801/6847.
Against regional currencies, the ringgit weakened slightly against the Singapore Dollar to 3.1705/1761.
The ringgit also rose slightly against the Indonesian Rupiah to 227.5/228.0 and strengthened against the Thai Baht to 12.1188/1438.
Against the Philippine Peso, the ringgit remained unchanged at 6.47/6.48.
