Ringgit Opens Higher on Global Rate Cut Momentum
Kuala Lumpur: The ringgit opened marginally higher against the US dollar on Thursday, with the US Dollar Index (DXY) increasing by 0.2% to 103.47 points, as global interest rate cuts gained momentum, while the US Federal Reserve seemed hesitant to follow suit.
At 8:01 am, the ringgit edged up to 4.2940/4.3100 against the greenback from yesterday’s close of 4.2945/4.2995.
Market Insights
Bank Muamalat Malaysia Bhd chief economist Afzanizam Rashid said the European Central Bank is expected to lower its policy rates by 25 basis points due to inflation falling below the 2% target and weak business sentiment in the manufacturing sector.
Regional Developments
Afzanizam also said that regionally, the Bank of Thailand made a surprise 25 basis point cut, following similar moves by Indonesia and the Philippines, signaling that global interest rates may have peaked.
US Federal Reserve’s Decision
“However, the US Federal Reserve may hold off on further easing, given the resilience of the US economy, which gives the dollar an advantage,” he noted.
Ringgit’s Outlook
“The ringgit is likely to remain stable, as Bank Negara Malaysia may take a different approach, (owing to) concerns about persistent inflation risks,” he noted.
Foreign Currency Performance
At the opening, the ringgit was higher against a basket of major currencies. It rose against the euro to 4.6624/4.6798 compared with Wednesday’s close of 4.6780/4.6834, improved against the British pound to 5.5766/5.5974 from 5.5889/5.5954, and increased vis-a-vis the Japanese yen to 2.8713/2.8822 from 2.8772/2.8807.
Asean Currency Performance
The local note was traded mixed versus Asean currencies. It appreciated against the Singapore dollar to 3.2694/3.2818 from yesterday’s 3.2800/3.2841 and was higher against the Thai baht to 12.9279/12.9858 from 12.9329/12.9546 on Wednesday.
Basket of Major Currencies
The ringgit was almost flat against the Indonesian rupiah at 276.8/278.0 from 276.8/277.3 yesterday and almost unchanged versus the Philippine peso at 7.43/7.46 from 7.43/7.45 previously.
Conclusion
The ringgit’s moderate gain on Thursday is a reflection of the momentum in global interest rate cuts, which may have peaked. The USD Index’s 0.2% rise, despite concerns over inflation and business sentiment, indicates a more cautious approach from the US Federal Reserve. The ringgit’s stability against major currencies and Asean currencies is likely to continue, driven by the country’s macroeconomic fundamentals and monetary policy stance.
FAQs
* What was the opening rate of the ringgit against the US dollar?
The ringgit opened marginally higher at 4.2940/4.3100 against the greenback.
* What was the movement in the US Dollar Index (DXY) on Thursday?
The US Dollar Index (DXY) increased by 0.2% to 103.47 points.
* What is the expected policy rate cut by the European Central Bank?
The European Central Bank is expected to lower its policy rates by 25 basis points due to inflation falling below the 2% target and weak business sentiment in the manufacturing sector.
* What is the outlook for the ringgit, according to Bank Muamalat Malaysia Bhd chief economist Afzanizam Rashid?
The ringgit is likely to remain stable, as Bank Negara Malaysia may take a different approach, (owing to) concerns about persistent inflation risks.