The Strength of the Ringgit

The ringgit has opened at its most robust level in over four years against the greenback, following a recent decision by the US Federal Reserve (Fed) to cut its benchmark lending rate by 25 basis points (bps).

As of 8 am, the ringgit reached 4.1010/1075 against the US dollar, marking its peak since October 5, 2021. This is an improvement from 4.1155/1195 at the close of the previous day, as reported by Bloomberg.

Market Insights and Economic Outlook

The chief economist at Bank Muamalat Malaysia Bhd, Mohd Afzanizam Abdul Rashid, noted that the Federal Open Market Committee had indeed delivered the anticipated 25-bps reduction during its final meeting, which concluded yesterday.

He further mentioned that the US Dollar Index experienced a decline of 0.55 percent to 98.671 following this decision. The meeting indicated the possibility of additional cuts in 2026 and 2027, as stated in his remarks to Bernama.

According to Mohd Afzanizam, the Fed may maintain stable rates in the near term while evaluating the changing economic landscape.

“The potential for the ringgit to appreciate further is significant, particularly as Bank Negara Malaysia is unlikely to lower its policy rate,” he stated.

Future Projections for the Ringgit

“Anticipated narrowing differences between the Federal Funds Rate and the Overnight Policy Rate will bolster the ringgit, alongside the ongoing fiscal consolidation efforts,” he explained.

He also highlighted that the latest review from Fitch Ratings reflects a positive outlook on Malaysia’s fiscal discipline.

“Thus, the US dollar-ringgit pair should continue to show an upward trend. The local currency could even test a drop below the RM4.10 mark by the end of the day following the Fed’s decision,” he added.

Performance Against Other Currencies

In other news, the ringgit opened lower against several major currencies.

It declined against the Japanese yen to 2.6342/6388 from 2.6240/6267, weakened against the British pound to 5.4896/4983 from 5.4781/4835, and fell versus the euro to 4.7982/8058 from 4.7884/7930 at the close on Wednesday.

Conversely, the local currency showed strength against ASEAN currencies, improving against the Singapore dollar to 3.1737/1789 from 3.1748/1781 and firming against the Indonesian rupiah to 245.7/246.2 from 246.5/246.9 previously.

The ringgit also opened higher against the Thai baht at 12.9112/9382 from 12.9243/9422 and was better positioned against the Philippine peso at 6.92/6.94 from 6.95/6.96 yesterday.

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