Ringgit Opens Higher Against US Dollar After Fed Rate Cut
Kuala Lumpur: A Positive Start
The ringgit opened at the 4.38 level against the US dollar on Friday after the US Federal Reserve (Fed) cut interest rates by 25 basis points (bps) during its Federal Open Market Committee (FOMC) meeting last night.
A Strong Start
At 8am, the ringgit appreciated to 4.3860/4.4100 against the US dollar from yesterday’s close of 4.4020/4.4065. This positive movement can be attributed to the Fed’s decision to cut interest rates, which has created a more favorable environment for the ringgit.
Expert Insights
Bank Muamalat Malaysia Bhd chief economist Afzanizam Rashid noted that the Fed Funds Rate currently ranges between 4.50% and 4.75%. He also highlighted that the 10-year US Treasury yield dropped by 11 bps to 4.31%, and the US Dollar Index (DXY) eased by 0.55% to 104.508 points.
A Look Ahead
Afzanizam explained that the Fed’s decision was made despite uncertainties surrounding president-elect Donald Trump’s policies for next year, which are viewed as potentially inflationary. He added that the Fed considers its current monetary policy stance to be restrictive, leaving room for possible rate reductions ahead. Consequently, we may observe the ringgit showing an upward trend today.
A Mixed Performance Against Major Currencies
The ringgit was weaker against a basket of major currencies. It fell vis-a-vis the British pound to 5.6943/5.7255 from Thursday’s close of 5.6821/5.6879, dipped versus the Japanese yen to 2.8637/2.8795 from 2.8597/2.8629, and was slightly lower against the euro at 4.7347/4.7606 from 4.7317/4.7365 previously.
A Closer Look at Regional Currencies
The local note traded mixed versus Asean currencies. It rose versus the Philippine peso to 7.47/7.51 from 7.49/7.51 yesterday and went up against the Indonesian rupiah to 278.6/280.3 from 279.6/280.0 previously. However, it weakened vis-a-vis the Singapore dollar to 3.3207/3.3394 from 3.3178/3.3216 at yesterday’s close and depreciated against the Thai baht to 12.8947/12.9767 from 12.8290/12.8492 previously.
Conclusion
The ringgit’s positive performance against the US dollar is a direct result of the Fed’s interest rate cut. With the Fed considering its current monetary policy stance to be restrictive, there may be further rate reductions ahead, which could lead to a continued upward trend for the ringgit.
Frequently Asked Questions
Q: Why did the ringgit open higher against the US dollar?
A: The ringgit opened higher against the US dollar due to the US Federal Reserve (Fed) cutting interest rates by 25 basis points (bps) during its Federal Open Market Committee (FOMC) meeting last night.
Q: How did the ringgit perform against major currencies?
A: The ringgit was weaker against a basket of major currencies, including the British pound, Japanese yen, and euro.
Q: How did the ringgit perform against regional currencies?
A: The ringgit traded mixed versus Asean currencies, with some currencies appreciating and others depreciating against the ringgit.