Ringgit opens stronger vs greenback as Fed leaves rates unchanged

KUALA LUMPUR: The ringgit opened stronger against the US dollar today, supported by renewed buying interest after the US Federal Reserve (Fed) left interest rates unchanged overnight, with analysts anticipating potential rate cuts later this year, said an economist.

At 8 am, the local note appreciated to 4.2205/2510 versus the greenback compared to Wednesday's close of 4.2360/2435.

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the US Dollar Index (DXY) rose 0.38 per cent to 99.614 points as the Federal Open Market Committee (FOMC) left its key rate unchanged at between 4.25 per cent and 4.50 per cent.

"It was a unanimous decision and in line with market expectations. Despite that, the FOMC has become increasingly worried about the prospect of higher inflation and unemployment, a situation best described as stagflation (stagnant growth but high inflation).

"As such, this would pose a dilemma for the Fed to balance its dual mandate -- price stability and maximum employment," he told Bernama.

Nonetheless, Mohd Afzanizam said the Fed may cut rates in the second half of the year with more clarity about the impact of tariff shocks.

"On that note, the rate thesis for this year remains intact as the inflation risks are seen as transitory, while the downside risk to growth has become elevated.

"The ringgit has depreciated in the past two days. Perhaps it would stabilise today in the current trajectory of between RM4.23 and RM4.24," he added.

He said today's focus is Bank Negara Malaysia's (BNM) overnight policy rate -- economists were mixed about the Monetary Policy Committee (MPC) decision.

"We are of the view that BNM will deliver a 25 basis points cut as a pre-emptive measure to support the economy with ongoing tariff negotiations," he said.

In the early session, the ringgit traded higher against a basket of major currencies.

It increased versus the Japanese yen to 2.9336/9550 from 2.9556/9613 at Wednesday's close, gained vis-a-vis the euro to 4.7704/8049 from 4.8104/8189 yesterday, and strengthened against the British pound to 5.6090/6496 from 5.6479/6579 previously.

Similarly, the ringgit performed better against its ASEAN peers.

It rose versus the Indonesian rupiah to 255.2/257.1 from Wednesday's close of 256.1/256.7, was better against the Singapore dollar at 3.2601/2841 from 3.2802/2862, rose against the Philippine peso to 7.62/7.67 from 7.64/7.66 and improved against the Thai baht to 12.8224/9288 from 12.9383/9691 previously.

-- BERNAMA