The ringgit opened stronger against the US dollar on Thursday, buoyed by renewed buying interest after the US Federal Reserve (Fed) kept interest rates unchanged, with analysts expecting potential rate cuts later this year.
At 8am, the local note advanced to 4.2205/2510 against the greenback compared to Wednesday’s close of 4.2360/2435.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid noted that the US Dollar Index (DXY) gained 0.38% to 99.614 points after the Federal Open Market Committee (FOMC) maintained its key rate between 4.25% and 4.50%.
“It was a unanimous decision and in line with market expectations. Despite that, the FOMC has become increasingly worried about the prospect of higher inflation and unemployment, a situation best described as stagflation (stagnant growth but high inflation),” he said.
He added that this economic backdrop presents a dilemma for the Fed in balancing its dual mandate — price stability and maximum employment.
Mohd Afzanizam believes the Fed may resort to rate cuts in the second half of the year once there is clearer insight into the effects of tariff shocks.
“On that note, the rate thesis for this year remains intact as the inflation risks are seen as transitory, while the downside risk to growth has become elevated,” he said.
He also pointed out that the ringgit had depreciated in the past two days but might stabilise within the current trajectory of RM4.23 to RM4.24.
Attention now shifts to Bank Negara Malaysia’s (BNM) overnight policy rate decision, with economists divided on the potential outcome from the Monetary Policy Committee (MPC).
“We are of the view that BNM will deliver a 25 basis points cut as a pre-emptive measure to support the economy with ongoing tariff negotiations,” he added.
The ringgit also performed well against a basket of major and regional currencies in early trading.
It rose against the Japanese yen to 2.9336/9550 from 2.9556/9613, gained against the euro to 4.7704/8049 from 4.8104/8189, and strengthened versus the British pound to 5.6090/6496 from 5.6479/6579.
Regionally, the local note appreciated against the Indonesian rupiah to 255.2/257.1 from 256.1/256.7, improved against the Singapore dollar at 3.2601/2841 from 3.2802/2862, rose against the Philippine peso to 7.62/7.67 from 7.64/7.66, and gained on the Thai baht to 12.8224/9288 from 12.9383/9691.
