KUALA LUMPUR (July 28): The ringgit rebounded by 0.37% against the US dollar in the early today after the US Federal Reserve left interest rates unchanged but said would adopt a gradual pace toward tightening of interest policy this year.

At 10.38am, the local note was quoted at 4.0640 against the greenback, after strengthened by 0.7% to 4.0500 earlier.

Nevertheless, ringgit was weaker against other major currencies.

At 10.52am, the local note fell 0.07% versus the Singapore Dollar to quote at 3.0082, declined 0.45% to the Pound Sterling at 5.3708 while sliding 0.29% against the Euro at 4.4996.

In a FX Strategies note to clients today, AmBank FX Research maintained its view that the local note to trade on a depreciation bias against the US dollar within the trading range of 4.016 to 4.143 on higher risk premium and weaker crude oil prices.

Last week, Fitch has downgraded Malaysia’s government long-term local bond rating to ‘A-’ from ‘A’.

The firm also downgraded Petroliam Nasional Bhd's (Petronas) long-term foreign- and local-currency issuer default ratings to "A-", from "A", although the international rating agency has maintained the short-term foreign-currency issuer default ratings at "F1" yesterday.

Today, MIDF Research maintained its year-end forecast for the ringgit at 3.9500 despite the downgrade.

"Logically, a revision in credit rating usually has an eventual material impact to the exchange rate via change in fund flows to the respective country," MIDF said in a research report today.

It saida lower credit rating would imply higher yield and could affect fund flow as investors and institutions rebalance their portfolio accordingly.

"However, this appears not to be the general situation. Case in point, Philippines and Thailand holds lower credit rating than Malaysia but have lower 10-year sovereign bond yield," it added.