Kuala lumpur: The ringgit opened on a weak note against the US dollar while showing strength against a basket of major currencies on Friday. This development comes as tensions in West Asia continue to impact market sentiment, leading investors to adopt a risk-off approach by holding onto cash.
According to BERNAMA News Agency, Mohd Afzanizam Abdul Rashid, the chief economist at Bank Muamalat Malaysia Bhd, highlighted that the growing cautiousness in the market is driven by escalating geopolitical issues, particularly the ongoing US-Iran conflict. At the start of the day, the ringgit traded at 3.9275/9400 against the US dollar, compared to its previous close of 3.9240/9280.
The price of Brent crude experienced a significant surge of 9.86%, reaching US$101.05 per barrel. This increase is attributed to the ongoing war between the US and Iran, with US President Donald Trump expressing his intent to dismantle the Iranian regime, downplaying the rising oil prices as a secondary concern. In response, Iran's new Supreme Leader, Mojtaba Khamenei, announced plans to close the Straits of Hormuz as part of their strategic approach.
Concerns over private credit markets are also growing due to increased investor redemptions. Concurrently, US Treasury yields have risen, reflecting anxieties over fiscal deficits, exacerbated by the mounting costs associated with the war. Rashid emphasized that the current market environment favors holding cash, a strategy that fund managers are likely to adopt.
In the coming week, the US Federal Open Market Committee (FOMC) is scheduled to meet to discuss the federal funds rate. Rashid noted that market participants would closely monitor the committee's language for any indicators of future policy directions.
Despite its weakness against the US dollar, the ringgit showed gains against other major currencies, including the Japanese yen, British pound, and euro. Additionally, it performed well against most ASEAN currencies, with notable improvements against the Thai baht, Philippine peso, and Singapore dollar, while remaining stable against the Indonesian rupiah.