Ringgit closes lower amid US Fed leadership speculations

The US dollar strengthened as investors reconsidered interest rate expectations after Kevin Warsh was mentioned as a possible Fed chair, says analyst.

KUALA LUMPUR:

 The ringgit closed lower against the US dollar on the last trading day of the week, pressured by renewed demand for the greenback amid speculations surrounding the future leadership of the US Federal Reserve (Fed).

At 6pm, the ringgit depreciated to 3.9440/3.9500 versus the US dollar from 3.9275/3.9315 at yesterday’s close.

Bank Muamalat Malaysia Bhd chief economist Afzanizam Rashid said the US dollar strengthened as investors reassessed US interest rate expectations following reports that former Federal Reserve governor Kevin Warsh is being mentioned as a potential Fed chairman.

“Warsh, who served at the Fed from 2006 to 2011, was known as an inflation hawk, prompting markets to anticipate a more cautious stance on interest rate cuts should he assume the role,” he told Bernama.

Afzanizam said the market appeared to believe that the incoming Fed chairman may not immediately align with the White House’s push for substantial interest rate reductions, given the central bank’s long-standing mandate of ensuring price stability and maximum employment.

“Whoever takes on the Fed chairman role will continue to follow the same policy playbook, as these objectives are embedded in law and preserving the institution’s credibility remains the Fed’s top priority,” he said, adding that the news likely provided an opportunity for traders to lock in gains.

At the close, the ringgit traded mostly higher against a basket of major currencies.

It appreciated vis-a-vis the British pound to 5.4163/5.4245 from yesterday’s close of 5.4207/5.4263, climbed against the Japanese yen to 2.5562/2.5603 from 2.5616/2.5644, but edged lower against the euro to 4.6957/4.7029 from 4.6953/4.7001.

As for its performance against Asean peers, the ringgit strengthened vis-a-vis the Thai baht to 12.5250/12.5544 from 12.5930/12.6119 previously.

However, it slid against the Singapore dollar to 3.1077/3.1127 from 3.1065/3.1099, slipped versus the Philippine peso to 6.69/6.71 from 6.66/6.67, and weakened against the Indonesian rupiah to 234.9/235.4 from 234.4/234.7 yesterday. - FMT