Ringgit ends higher ahead of FOMC decision

KUALA LUMPUR: The ringgit ended higher against the US dollar today ahead of the Federal Open Market Committee (FOMC) interest rate decision which is due later tonight.

The US dollar Index (DXY), which measures the performance of the greenback against six other major currencies, also traded lower on traders’ anticipation that the FOMC will maintain its current interest rates, analysts said.SPI Asset Management managing director Stephen Innes said as traders have been buying US dollars for the past two months, there was likely a minor position adjustment today, resulting in the ringgit closing firmer.

“Selling the dollar might sound counterintuitive as there has been an overabundance of hawkish US Federal Reserve (Fed) lean in the media.

“However, we do not think the FOMC meeting will lead to significant repricing in the front end of the yield curve which is essential for foreign exchange,” he said.

Innes also explained that the changes in market pricing for the end of 2024 and 2025 have moved closer to the median projections in the Fed’s “dot plot” since the last FOMC meeting.

“Hence if anything, the tail risk is for the US dollar to weaken if the Fed does not meet hawkish forward expectations,” he told Bernama.

Meanwhile, Bank Muamalat Malaysia Bhd chief economist Afzanizam Rashid noted that inflation in the UK continued to head south with the August headline and core inflation moderating to 6.7% (July: 6.8%) and 6.2% (July: 6.9%), respectively.

“Perhaps the Bank of England’s benchmark rate has really been nearing its peak level. On the US dollar-ringgit pair, the ringgit showed a slight appreciation of 0.23% to the US dollar.

“However, it remains to be seen whether such appreciation can be sustained,” he said, adding that we shall see how the Fed’s narrative and their latest forecasts (play out) when they conclude the FOMC meeting tonight.

At 6pm, the local currency improved to 4.6840/4.6880 against the greenback from yesterday’s close of 4.6940/4.6980.

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

It rose against the Japanese yen to 3.1653/3.1682 from 3.1776/3.1806 at yesterday’s close, advanced against the euro at 5.0114/5.0157 from 5.0160/5.0203 and was better versus the British pound at 5.7955/5.8005 from 5.8126/5.8175 yesterday.

At the same time, the local currency also traded higher against other Asean currencies.

It strengthened vis-à-vis the Singapore dollar to 3.4348/3.4382 from 3.4436/3.4468 yesterday and gained against the Philippine peso at 8.24/8.26 from 8.27/8.28 previously.

It also appreciated against the Indonesian rupiah to 304.5/304.9 from 305.1/305.6 at yesterday’s close and firmed versus the Thai baht to 12.9891/13.0056 from 13.0563/13.0718 yesterday. - FMT