Ringgit strengthens amid anticipation of US Fed rate cut

 

KUALA LUMPUR: 

The ringgit continued to be on a stronger footing against the US dollar today after recent weakness as the markets anticipate a rate cut by the US Federal Reserve (Fed), said an economist.

Bank Muamalat Malaysia Bhd chief economist Afzanizam Abdul Rashid said Bank Negara Malaysia (BNM) is widely expected to keep the overnight policy rate (OPR) unchanged, providing further support for the ringgit.

“Ultimately, the gap between the two rates will make the ringgit look more appealing at the current juncture,” he told Bernama.

Markets are pricing in a 25-basis point interest rate cut at the Fed’s November meeting, set for Nov 6-7.

BNM’s monetary policy committee (MPC) meeting is scheduled almost at the same time on Nov 5-6.

Meanwhile, SPI Asset Management managing director Stephen Innes said the markets seem to be bracing for a political gridlock, prompting investors to ease off the Donald Trump trade — and nowhere is this more obvious than in the overbought US dollar/ringgit.

He said the pair has seen some notable trimming as traders hedge their bets.

“Should we land in a political gridlock — a president without Congress’ backing — the stage for sweeping policy changes shrinks considerably, especially in the foreign exchange world.

“This might just be why we’re seeing a rally in the ringgit today. With a gridlocked Congress, bold economic overhauls are likely off the table, giving the ringgit some short-term breathing room,” he added.

Innes said that while the ringgit’s rally is making headlines, it is important to keep the broader context in mind — it is still a cautious move, with context being the key.

“In the near term, the ringgit’s direction will largely depend on the outcome of the US election, suggesting that tomorrow could be a pivotal day,” he said.

At 6pm, the local note improved to 4.3415/4.3505 against the greenback from yesterday’s close of 4.3715/4.3765.

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

It rose vis-a-vis the British pound to 5.6361/5.6478 from yesterday’s close of 5.6707/5.6772, appreciated versus the Japanese yen to 2.8525/2.8586 from 2.8775/2.8810 and went up against the euro to 4.7283/4.7381 from 4.7636/4.7691.

The local note traded higher versus Asean currencies.

It perked up against the Indonesian rupiah to 275.6/276.3 from 277.5/277.9, strengthened vis-a-vis the Singapore dollar to 3.2953/3.3023 from 3.3185/3.3226, was up against the Thai baht to 12.9165/12.9491 from 12.9664/12.9882 and was higher against the Philippine peso at 7.44/7.46 from yesterday’s close of 7.49/7.50. - FMT