Ringgit opens slightly lower against US$, rises vs other major currencies

KUALA LUMPUR: The ringgit opened slightly lower against the greenback on a lack of buying interest despite a 50 basis points US interest rate cut decision by the US Federal Reserve (Fed).

At 8.05 am, the local note eased to 4.2430/2600 versus the greenback from Wednesday’s close of 4.2410/2460.

At last night’s Federal Open Market Committee (FOMC) meeting, the Fed made a move to reduce the interest rate from 5.25 per cent - 5.50 per cent to 4.75 per cent - 5.00 per cent, said Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid.

He said the decision was not unanimous, with one member advocating for a smaller 25 basis point reduction. However, there was a consensus on the need for a shift in monetary policy direction.

"Based on their latest decision, the Fed is moving towards a more neutral stance as indicated in their median forecast where they are targeting the Fed Fund Rate to reach 4.4 per cent, 3.4 per cent and 2.9 per cent by the end of 2024, 2025 and 2026.

"It seems that the Fed is confident they can engineer a soft landing and the 50 basis points cut represents their commitment towards achieving maximum employment, which is their other mandate besides price stability,” he told Bernama.

Mohd Afzanizam said the long-term Fed Fund Rate is at 2.9 per cent. In that sense, a possible cut of 200 to 225 basis points is expected between now and until end-2026 based on the Fed’s median forecast.

"On that note, the ringgit should stay resilient in the near term and gradually appreciate against the US dollar.

"The average USD MYR since the country removed the currency peg on July 21, 2005, stands at RM3.78, and this should serve as the yardstick for the USD MYR direction. This would mean the ringgit has the potential to appreciate going forward,” he added.

Meanwhile, the ringgit was traded higher against a basket of major currencies.

It strengthened against the British pound to 5.6003/6228 from Wednesday’s close of 5.6091/6158, surged vis-a-vis the Japanese yen to 2.9717/9838 from 2.9940/9977 and appreciated versus the euro to 4.7148/7337 from 4.7236/7292 previously.

However, the local note traded mixed against ASEAN currencies.

It rose against the Singapore dollar to 3.2724/2858 from 3.2792/2833 at Wednesday’s close and gained against the Thai baht to 12.6994/7572 from 12.7472/7680 yesterday.

It traded almost flat against the Philippine peso to 7.61/7.65 from 7.61/7.62 and inched down versus the Indonesian rupiah to 276.6/277.9 from 276.5/277.0 on Wednesday. - Bernama