The Malaysian ringgit opened lower against the US dollar on Monday, reacting to the surprising strength in the United States Nonfarm Payroll (NFP) data released last Friday. The NFP report revealed that the US economy added 272,000 new jobs in May, significantly surpassing the consensus projection of 182,000 jobs. This unexpected surge in job creation has bolstered the greenback, putting pressure on the ringgit.
At 9.06 am, the ringgit was trading at 4.7150/7200 against the US dollar, down from Friday’s close of 4.6900/6940. Bank Muamalat Malaysia Bhd's chief economist, Dr. Mohd Afzanizam Abdul Rashid, commented on the situation, noting that the US average weekly earnings also increased to 4.1% year-on-year in May, up from 4.0% previously. "This indicates that wage growth remains resilient," he said, adding that this could influence the Federal Open Market Committee's (FOMC) upcoming decisions on monetary policy.
The ringgit's performance against other major currencies was mixed. It strengthened against the Japanese yen, British pound, and euro but showed varied results against its ASEAN peers. Specifically, the ringgit improved against the Thai baht and Singapore dollar but weakened against the Philippine peso and Indonesian rupiah.
Dr. Mohd Afzanizam pointed out that while the NFP data appears strong, the Labour Force Participation Rate (LFPR) declined to 62.5% in May from 62.7% in the previous two months. "This suggests that the US labor market is not entirely robust, as more people are opting out of the labor market," he explained. The upcoming assessment by the US Federal Reserve on the state of the labor market will be crucial in determining whether to maintain or adjust the current tight monetary policy.
"A shift towards an easing bias by the Federal Reserve could potentially lift the ringgit," Dr. Mohd Afzanizam added. As the market awaits the FOMC's decision on June 12, the ringgit is expected to remain under pressure.
In the meantime, the ringgit's performance against a basket of major currencies showed some resilience. It strengthened against the Japanese yen to 3.0066/0100 from 3.0163/0190 at the close last Friday, rose vis-a-vis the British pound to 5.9994/6.0057 from 6.0009/0060 previously, and was higher against the euro at 5.0814/0867 from 5.1079/1122 last week.
However, the ringgit's performance against its ASEAN peers was mixed. It improved against the Thai baht to 12.7743/7944 from 12.8465/8627 at last Friday’s close and rose versus the Singapore dollar at 3.4861/4901 compared with 3.4872/4905 previously. Conversely, it slid against the Philippine peso to 8.02/8.04 from 8.01/8.02 last week and slipped to 291.1/291.5 vis-a-vis the Indonesian rupiah from Friday’s 289.5/289.9.
As the global economic landscape continues to evolve, the ringgit's performance will be closely watched by investors and policymakers alike. The interplay between US economic indicators and the Federal Reserve's monetary policy decisions will play a crucial role in shaping the future trajectory of the ringgit.
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