Ringgit Strengthens On Fed S Dovish Outlook

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KUALA LUMPUR: The ringgit closed firmer against the US dollar today on hopes the US Federal Reserve (Fed) would continue to pause its rate hikes.
An analyst said investors are bracing for a major Fed decision and an intense week of central bank meetings this week, including Bank Negara Malaysia’s (BNM) Monetary Policy Committee (MPC) meeting.
He said the US’s latest core personal consumption expenditures (PCE) data provided some optimism that the Fed funds rate will be maintained at 5.5%.
September PCE print softened to 3.7% as expected from 3.8% in August, indicating a decrease in inflationary pressure.
Back home, investors will closely monitor the last MPC meeting for the year to gauge the economic performance and overnight policy rate (OPR), which is also expected to remain at the current level of 3%.
Malaysia’s OPR is now at a 250-basis points discount to the Fed funds rate, affecting the performance of the ringgit.
Meanwhile, AmBank Research said that the support for the ringgit would eventually step in when the Fed cuts the interest rate by mid-2024.
“We reiterate the call for the Fed to cut the rate by mid-2024, as the effects of tight monetary policy are starting to materialise.
“With the Fed’s medium-term outlook turning dovish, support for the ringgit would eventually step in,” it said in a note today.
At 6pm, the ringgit rose to 4.7600/4.7645 against the greenback from Friday’s close of 4.7750/4.7800.
The ringgit was also traded higher versus a basket of major currencies.
The ringgit rose against the Japanese yen to 3.1810/3.1842 from 3.1827/3.1862 at the close on Friday, edged up against the euro to 5.0375/5.0423 from 5.0438/5.0491, and increased versus the British pound to 5.7734/5.7789 from 5.7945/5.8005 previously.
The local currency was traded mixed against other Asean currencies.
It appreciated against the Singapore dollar to 3.4841/3.4877 from 3.4867/3.4906 and higher vis-à-vis the Philippine peso at 8.37/8.38 from 8.38/8.39 at the previous close.
The ringgit barely moved against the Indonesian rupiah at 299.5/299.9 from 299.5/300.0 and depreciated against the Thai baht to 13.2351/13.2531 from 13.1808/13.2008 at Friday’s close. - FMT

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