KUALA LUMPUR (April 27): The ringgit opened at 4.0977 against the US dollar in morning trade as investors weighed the outlook of the US dollar ahead of the US Federal Reserve's (Fed) monetary policy decision today.

At the time of writing, the ringgit was traded at 4.0998 against the US dollar after the exchange rate closed at 4.0977 yesterday. 

Over the last one year, the ringgit-US dollar exchange rate was between 3.9957 and 4.3733.

Against other curencies today, the ringgit strengthened against the Singapore dollar at 3.0881 at the time of writing, but weakened versus the Australian dollar at 3.1902.

Compared to the euro, the ringgit appreciated to 4.9462.

Overnight, it was reported that the Federal Open Market Committee (FOMC) of the Fed will end its two-day meeting tomorrow, and while no major policy changes are expected, investors will pay close attention to comments from chairman Jerome Powell. 

It was reported that Powell is likely to face questions over whether an improving labour market and rising coronavirus vaccination warrant a withdrawal of monetary easing. 

"Most analysts though expect him to say such talk is premature, which could put downward pressure on Treasury yields and the US dollar," Reuters reported. 

It was reported that the US dollar rose from an eight-week low against the euro yesterday, also gaining against major currencies such as the yen and Swiss franc, with investors consolidating positions ahead of the Fed's monetary policy meeting this week. 

It was reported that the US dollar had fallen nearly 3% since late March as US Treasury yields, which had risen this year and supported the greenback, traded in a narrow range. 

"Dollar bears are treading a bit carefully ahead of the Fed decision," Joe Manimbo, a senior market analyst at Western Union Business Solutions was quoted as saying.

UOB Malaysia senior economist Julia Goh, meanwhile, said there could be room for the ringgit to strengthen against the US dollar if the Fed continues to reassure markets that the regulator is in no hurry to withdraw support even as the US economy rebounds after contending with the impact of the Covid-19 pandemic. 

“We are reviewing our current MYR/USD forecast of 4.15 by end-June given the recent downshift,” Goh told theedgemarkets.com today.

Axi global chief market strategist Stephen Innes, on the other hand, said there is much pre-FOMC position squaring happening, hence the foreign exchange (forex) market will be a little choppy today.

“There will be a basis for some covering of short US dollar positions, [and] that is the reason for the move,” he told theedgemarkets.com.

Innes said the market could be positioning for a dovish Fed, and Asian forex is getting a bounce from the reopening of the European Union (EU) and continued strength in the US economy as global investors weigh the impact of the Covid-19 pandemic on the broader market.

“That means more exports out of Malaysia, hence more demand for the ringgit,” he said.