KUALA LUMPUR: The ringgit retreated from its recent two-day rally, opening slightly lower against the US dollar today, as expectations of aggressive rate cuts waned, according to an economist.

However, the local currency traded higher against a basket of major currencies this morning.

At 8 am, the ringgit slipped to 4.3285/3390 against the greenback, down from yesterday's close of 4.3270/3325.

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the latest US consumer price index (CPI) report showed that the sequential increase in Core CPI suggests US inflation remains sticky, tempering hopes for aggressive interest rate cuts by the Federal Reserve (Fed) next week.

The Core CPI rose 0.3 per cent month-on-month in August, exceeding the consensus estimate of 0.2 per cent. It has been climbing steadily from 0.1 per cent in June and 0.2 per cent in July.

"This is largely due to the higher inflation rate in the housing market, especially in rental costs, which account for 26.8 per cent of the total CPI," he told Bernama.

As a result, the Fed is unlikely to implement steep rate cuts, leading to higher yields on short-term US Treasury notes, Dr Mohd Afzanizam explained.

The yield on two-year US Treasury notes rose by 3.0 basis points, while the US Dollar Index (DXY) edged up 0.05 per cent to 101.684 points.

Given this, the US dollar could strengthen against other currencies, while the ringgit is likely to hover around RM4.33 today, he added.

In early trade, the ringgit strengthened against the euro to 4.7657/7772 from 4.7774/7835 at Wednesday's close, rose against the British pound to 5.6435/6572 from 5.6623/6695, and appreciated against the Japanese yen to 3.0350/0426 from 3.0558/0599.

The ringgit traded mixed against ASEAN currencies. It advanced against the Thai baht to 12.8024/8422 from 12.8523/8752 yesterday and gained against the Singapore dollar to 3.3176/3259 from 3.3223/3268.

However, it eased slightly against the Indonesian rupiah to 280.9/281.8 from 280.8/281.4 and was almost flat against the Philippine peso at 7.73/7.76 compared to 7.73/7.75.