KUALA LUMPUR: The ringgit opened lower against the US dollar on the first trading day of the year, weighed by market concerns over the US Federal Reserve’s (Fed) potential decision to cut interest rates in 2025.
At 8 am, the ringgit eased to 4.4700/4805 against the greenback, compared with Tuesday’s close of 4.4690/4745.
Markets were closed on Wednesday for New Year’s Day.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid noted that the ringgit was the best-performing currency in 2024, gaining 2.72 per cent against the US dollar.
This was followed by the Hong Kong dollar and Thai baht, which appreciated by 0.55 per cent and 0.13 per cent, respectively.
Mohd Afzanizam attributed the performance to the Fed’s actions, as markets were wary in the first half of 2024, anticipating a rate cut.
He said the Fed eventually cut its benchmark rate in September.
However, global currencies weakened against the US dollar after the Fed turned more hawkish in December, revising its stance to project only two rate cuts in 2025.
“The Fed’s decisions will be crucial, particularly regarding interest rate differentials, as various jurisdictions have also reduced rates.
“This could differentiate the ringgit from other currencies, especially as Bank Negara Malaysia (BNM) appears inclined to maintain the current Overnight Policy Rate (OPR) given the possibility of higher inflation this year. As such, the ringgit is expected to linger around RM4.46 to RM4.47,“ he told Bernama.
At present, Mohd Afzanizam said the dollar-ringgit rate is above its 50-day and 100-day moving averages of RM4.4321 and RM4.3719, respectively, with support at RM4.4500 and resistance at RM4.5339.
He added that the technical indicators suggest the ringgit is in the oversold region, indicating a potential appreciation.
Nonetheless, he said policy uncertainties stemming from the incoming US administration and the Fed’s hawkish stance continue dampening the currency market’s enthusiasm.
Meanwhile, the ringgit was higher against other major currencies.
It appreciated against the Japanese yen to 2.8338/8408 from Tuesday’s close of 2.8529/8566, gained against the British pound to 5.5960/6091 from 5.6095/6164, and ticked up vis-à-vis the euro to 4.6269/6378 from 4.6549/6606.
The local note also traded mostly better against ASEAN currencies.
It strengthened versus the Singapore dollar to 3.2730/2812 from 3.2824/2867 and rose against the Thai baht to 13.0302/0726 from 13.0566/0830.
However, it was marginally lower against the Indonesian rupiah at 277.0/277.8 from 276.9/277.5 and slightly higher against the Philippine peso at 7.69/7.71 from 7.70/7.72 previously.
