KUALA LUMPUR, March 21 — The ringgit extended yesterday’s gains to close higher against the US dollar today as the market expects the US Federal Reserve (Fed) to take a dovish stance on its interest rate, said an economist.
At 6 pm, the local note rose to 4.4690/4715 versus the greenback compared with yesterday’s closing rate of 4.4830/4885.
Bank Muamalat Malaysia Bhd chief economist and social finance Dr Mohd Afzanizam Abdul Rashid said it appeared that the markets expected the US Federal Reserve’s (Fed) stance to tilt towards the dovish side given the recent spectre in the United States (US) banking industry.
“This (dovish stance) could really explain why the US dollar has been trading in a narrow range today,” he told Bernama.
Meanwhile, SPI Asset Management managing director Stephen Innes said the broader market is starting to compartmentalise the US and European Union (EU) banking issues with no contagion risk to Asia.
“But importantly, in foreign exchange markets, it’s getting treated as a dovish Fed shock.
“Hence, the ringgit is trading stronger as US rate cuts are now expected before year-end,” he said.
Innes said the focus now turns on the Federal Open Market Committee (FOMC) on Wednesday where the debate centred on either a rate pause or a 25-basis point hike, but forward guidance will be important.
“If Fed chair Jerome Powell leans dovish, the ringgit will rally. But ahead of the announcement, ringgit’s upside could be limited,” he added.
The ringgit was traded lower against a basket of major currencies, except the Japanese yen.
The local note declined versus the British pound to 5.4759/4789 from 5.4657/4724 at yesterday’s close and slipped vis-a-vis the euro to 4.8028/8055 from 4.7843/7901, however, it appreciated against the Japanese yen to 3.3807/3829 from 3.4177/4224 previously.
Meanwhile, the ringgit was traded mixed against Asean currencies.
The local currency strengthened against the Thai baht to 13.0166/0311 from 13.1408/1631 on Monday and rose marginally against the Indonesian rupiah to 291.10/291.50 from 291.80/292.30 previously.
It eased slightly versus the Singapore dollar to 3.3423/3444 from 3.3408/3454 yesterday and weakened versus the Philippine peso to 8.21/8.22 from 8.20/8.21 previously. — Bernama
