Kuala Lumpur: The ringgit opened stronger against the US dollar today, buoyed by renewed buying interest following the US Federal Reserve’s decision to keep interest rates unchanged overnight. Analysts are predicting potential rate cuts later in the year, according to an economist.
According to BERNAMA News Agency, at 8 am, the local currency appreciated to 4.2205/2510 against the greenback, improving from Wednesday’s close of 4.2360/2435. Dr. Mohd Afzanizam Abdul Rashid, the chief economist at Bank Muamalat Malaysia Bhd, noted that the US Dollar Index (DXY) rose by 0.38 per cent to 99.614 points as the Federal Open Market Committee (FOMC) held its key rate steady at a range of 4.25 per cent to 4.50 per cent.
Dr. Mohd Afzanizam explained that the decision was unanimous and aligned with market expectations. Despite this, the FOMC has expressed concern over the potential for higher inflation and unemployment, a scenario that could lead to stagflation, characterized by stagnant growth and high inflation. This situation presents a challenge for the Fed in balancing its dual mandate of price stability and maximum employment.
Looking ahead, Dr. Mohd Afzanizam suggested that the Fed might consider rate cuts in the latter half of the year as the impact of tariff shocks becomes clearer. He stated that while inflation risks are viewed as transitory, the downside risks to economic growth have increased.
In recent days, the ringgit experienced depreciation, but Dr. Mohd Afzanizam anticipated stabilization within the range of RM4.23 to RM4.24. Today’s focus shifts to Bank Negara Malaysia’s (BNM) overnight policy rate, with mixed opinions among economists regarding the Monetary Policy Committee (MPC) decision. Dr. Mohd Afzanizam expects BNM to implement a 25 basis points cut as a proactive measure to support the economy amid ongoing tariff negotiations.
In the early trading session, the ringgit showed gains against a range of major currencies. It appreciated against the Japanese yen at 2.9336/9550 from 2.9556/9613 on Wednesday, strengthened against the euro to 4.7704/8049 from 4.8104/8189, and improved against the British pound to 5.6090/6496 from the previous 5.6479/6579.
The ringgit also performed well against its ASEAN counterparts. It rose against the Indonesian rupiah to 255.2/257.1 from Wednesday’s 256.1/256.7, gained against the Singapore dollar at 3.2601/2841 from 3.2802/2862, appreciated against the Philippine peso to 7.62/7.67 from 7.64/7.66, and improved against the Thai baht to 12.8224/9288 from 12.9383/9691.