Ringgit gains ground against US dollar as major central banks pause rate hikes

KUALA LUMPUR: The ringgit opened marginally higher against the US dollar on the last trading day of the week, as several major central banks took a break from raising interest rates this week.

On the home front, Bank Negara Malaysia’s (BNM) Monetary Policy Committee maintained the Overnight Policy Rate at 3.00 per cent yesterday at its last meeting of the year.

At 9.05 am, the ringgit appreciated slightly to 4.7470/7525 against the greenback from Thursday’s close of 4.7485/7525.

Bank Muamalat Malaysia Bhd chief economist and head of social finance Dr Mohd Afzanizam Abdul Rashid said the US Federal Reserve (Fed) and the Bank of England are among the major central banks that have decided to keep their policy rates unchanged.

“In fact, some countries have already started to reduce their interest rates. For example, China has lowered its one-year Medium-Term Lending Facility rate by 25 basis points (bps) to 2.50 per cent. Similarly, Brazil and Chile have both cut their benchmark interest rates by 150 bps and 225 bps, bringing them to 12.25 per cent and 9.00 per cent, respectively.

“If this trend continues, we believe the ringgit is poised for a recovery. However, it might not be a smooth journey as geopolitical risks could lead to a risk-off mode, increasing demand for safe-haven currencies like the US dollar,” he told BK.

Consequently, Mohd Afzanizam anticipates the ringgit to perform better today on the possibility that global benchmark interest rates have reached their peak.

Meanwhile, the local currency was traded higher against a basket of major currencies.

The ringgit rose against the Japanese yen to 3.1552/1591 from 3.1593/1622 on Thursday, higher against the euro at 5.0399/0457 from 5.0448/0491, and climbed against the British pound to 5.7847/7914 from 5.7860/7909 yesterday.

The local note was traded mostly higher against other Asean currencies.

It appreciated against the Singapore dollar to 3.4784/4827 from 3.4798/4830 yesterday, edged up against the Indonesian rupiah at 299.3/299.8 from 299.4/299.8 and increased against the Thai baht to 13.1824/2036 from 13.2156/2337 previously.

The ringgit was unchanged against the Philippine peso at 8.38/8.40 as per yesterday’s close. – BK