Ringgit closes higher on Fed’s dovish signal

 

KUALA LUMPUR: 

The ringgit ended higher against the US dollar today as the US Federal Reserve (Fed) maintained its benchmark interest rate but signalled that the rate-cutting narrative remained on track.

Bank Muamalat Malaysia Bhd chief economist Afzanizam Rashid said the Fed remains unfazed by the interest rate outlook despite navigating heightened policy uncertainties, particularly concerning the impact of import tariffs.

“The Fed’s latest macroeconomic projections reaffirm their outlook of two rate cuts in 2025, 2026, and 2027, consistent with December’s forecast.

“This reinforces greater clarity on monetary policy direction, with no deviation from the planned course,” he told Bernama.

Additionally, Afzanizam said the Fed’s decision to reduce the monthly redemption cap on US Treasury bonds to US$5 billion from US$25 billion signals an intent to ease rates soon, as the move ensures ample liquidity in the financial system.

However, he reckons that the market sentiment is likely to stay cautious given the escalating geopolitical tensions in the Middle East and the persistent tariff disputes, both of which show no signs of de-escalation.

The local currency gained 0.33% to RM4.4215/4.4270 from yesterday’s close of RM4.4330/4.4400.

The ringgit traded mostly higher against a basket of major currencies.

It bounced versus the euro to 4.7973/4.8033 from 4.8324/4.8400 at yesterday’s close, improved against the British pound to 5.7276/5.7347 from 5.7496/5.7587 but eased vis-a-vis the Japanese yen to 2.9728/2.9767 from 2.9595/2.9643.

The local currency also strengthened against Asean currencies.

It edged up against the Singapore dollar to 3.3117/3.3164 from 3.3251/3.3306 at the close yesterday, advanced versus the Thai baht to 13.1163/13.1388 from 13.1778/13.2056 and gained vis-a-vis the Philippine peso to 7.72/7.74 from 7.74/7.75 previously.

However, the local currency was little changed against the Indonesian rupiah at 268.1/268.6 from 268.1/268.7. - FMT