KUALA LUMPUR, May 7 (Bernama): The expected pause in the US Fed Funds Rate is projected to lead to a weaker US dollar in the near term, thus continuing to boost the ringgit’s appeal this week.
Mohd Abdul Rashid, chief economist at Bank Muamalat Malaysia Bhd and head of social finance believes that the ringgit can traverse its immediate level support (4.4254) and will linger between 4.4100 and 4.4200 by next week.
“In addition, all eyes would be looking at Malaysia’s first-quarter (1Q) economic data, which will be announced on May 12.
“Our preliminary estimates showed that 1Q gross domestic product (GDP) could come in at around 5.0 per cent to 5.5 per cent with domestic demand being the key driver for growth,’’ he told Bernama.
Bank Negara Malaysia’s (BNM) Chairman said that the outlook for domestic economy remained positive.
During the week, BNM’s monetary policy committee (MPC) unexpectedly increased the Overnight Policy Rate (OPR) by 25 basis points to 3.00 per cent.
At that rate, central bank officials said the benchmark interest rates would return to levels seen before the crisis and be better aligned with a stronger economy.
“We will ensure that our OPR supports sustainable growth while keeping inflation in check,” it said in its May 2023 monetary policy statement snapshot.
US Federal Reserve is also reaching its terminal level after an even smaller rate hike of 25 basis points on Wednesday. The greenback has been under pressure against a basket a major currencies.
On Friday, the ringgit traded stronger against the US dollar at a two-week high of 4.4350/4400 against Friday’s close of 4.4600/4645 a week earlier.
The local currency traded mainly lower than a basket of major foreign currencies, except the euro. It rose from 4.901/8955 to 4.8905/8955 last week.
The ringgit was down against the British pound, at 5.5908/5971 compared to 5.5558/5614. And it fell vis-avis the Japanese yen from 3.3050/3090 a few weeks ago.
The Asean currencies also fluctuated against the ringgit.
In the past, the local currency was 303.9/304.3 and now it is 302.1/302.6. The peso has also increased to 8.02/8.03 compared to the previous 8.05/8.06.
The Singapore dollar was down against the Thai Baht at 3.3464/3507 compared to 3.3351/3387 last week. Bernama