KUALA LUMPUR, March 8 (Bernama) — The ringgit gave up its gains in the last two days to close sharply lower against the greenback today after hawkish talk on the American interest rate outlook from US Federal Reserve (Fed) chairman Jerome Powell.
At 6 pm, the local note fell to 4.5230/5265 versus the greenback compared to yesterday’s closing rate of 4.4710/4730.
Bank Muamalat Malaysia Bhd’s head of economics, market analysis and social finance Mohd Afzanizam Abdul Rashid said the markets will continue to observe what Powell has to say to the US House of Representatives later tonight.
“It is highly likely that the same tone will emerge, ie, the (US) monetary policy stand is going to be restrictive,” he told Bernama.
Asked about the ringgit which has gone past RM4.50 against the US dollar currently and its impact on Malaysia’s economy, he said the weaker ringgit would mean export prices would be cheaper, helping the country’s competitiveness. However, a lower ringgit would also mean imports will go higher, and that would make inflation worse.
On whether the ringgit’s deteriorating performance would have an impact on the overnight policy rate (OPR) ahead of Bank Negara Malaysia’s (BNM) monetary policy committee (MPC) meeting on Thursday, he explained that theoretically, a higher interest rate could help increase the appeal of the ringgit as it can offer higher returns.
“(However), the OPR is not normally set to address currency market imbalances, therefore, the movement of the ringgit would be determined by market forces. We see no change in the OPR tomorrow. Hence, all eyes will be on the Fed chairman statement and the key data points to be announced later in the week,” he added.
At the last MPC meeting in January 2023, BNM kept the key rate unchanged at 2.75 per cent after making a cumulative 100-basis point hike since May 2022.
SPI Asset Management managing director Stephen Innes said the ringgit has recoiled in the face of an even more hawkish Fed after chairman Jerome Powell, in his testimony to the US Congress, left the door open to a faster pace of rate hikes.
“This was the worst possible outcome for the ringgit as higher US short-term yields not only lend support to the US dollar, but those higher yields are starting to look more attractive for long-term investors who still view Asia as a risky proposition,” he said.
The National People’s Congress meetings (NPC) in China also failed to inspire markets by not signalling a greater willingness to offer up more stimulus as the China economy rebounds from three years of lockdown, he added.
“It was a very bad day, and now investors hope for weaker US economic data to ease some of the rate hike jitters that are engulfing broader markets,” Innes said.
The ringgit was traded mostly higher against a basket of major currencies except for the euro.
The local note rose against the Japanese yen to 3.2880/2908 from 3.2909/2926 at Tuesday’s close and increased versus the British pound to 5.3530/3571 from 5.3715/3739 previously, but it fell slightly vis-a-vis the euro to 4.7650/7687 from 4.7647/7669.
Meanwhile, the ringgit was traded mostly lower against Asean currencies.
It depreciated against the Singapore dollar to 3.3397/3428 from 3.3210/3229 previously, weakened against the Indonesian rupiah to 292.90/293.30 from 290.90/291.1 and eased vis-a-vis the Philippine peso to 8.18/8.19 from 8.12/8.13.
However, the local note appreciated against the Thai baht to 12.8912/9070 from 12.9332/9453.
Source: BERNAMA News Agency