KUALA LUMPUR: The ringgit was traded in a tight range against the US dollar today as market participants were cautious about the Federal Open Market Committee (FOMC) meeting on March 21-22, said an economist.
At 6 pm, the local note rose marginally to 4.4830/4885 versus the greenback compared with Friday’s closing rate of 4.4850/4880.
Bank Muamalat Malaysia Bhd chief economist and social finance Dr Mohd Afzanizam Abdul Rashid said market participants were wary about this week's FOMC meeting although banking concerns had eased somewhat after UBS agreed to buy its ailing rival Credit Suisse.
"We believe markets are divided on whether the US Federal Reserve (Fed) would continue its hawkish stance in light of the recent events unfolding in respect of bank collapse in the United States (US).
"However, it should be positive for the ringgit because the futures market for Fed Funds rate has already priced in a rate cut in the second half of 2023.
"As such, the ringgit should stay guarded for now,” he told Bernama.
Meanwhile, SPI Asset Management managing director Stephen Innes said the decline in real yields bodes typically well for emerging market (EM) currencies, with Asian foreign exchange (forex) historically being the largest beneficiary.
"It also appears that real yields' influence on Asian forex has grown even more prominent over the last two years, given that there are a more significant number of lower-yielding currencies in Asia.
"So, falling real yields remain a strong tailwind for EM currencies, especially the ringgit since it has a strong correlation to China’s domestic consumption which is well on track,” he added.
Innes said Bank Negara Malaysia (BNM) might resume rate hikes if there is a solid reason to revise growth forecasts and this was hinted in the latest monetary policy statement, which stated that "the implementation of projects from the recently re-tabled Budget 2023 would provide upside risks to the domestic growth outlook".
"Moreover, the ringgit depreciation in February of 4.99 per cent was the most significant monthly decline since 2016. It could increase the rate hike prospects, undoubtedly boosting the ringgit’s appeal amid a dovish Fed shock. It is a balancing act call, however,” he added.
Meanwhile, the ringgit was traded lower against a basket of major currencies.
The local note fell against the Japanese yen to 3.4177/4224 from 3.3679/3704 at Friday’s close, declined versus the British pound to 5.4657/4724 from 5.4390/4426 and slipped vis-a-vis the euro to 4.7843/7901 from 4.7743/7775 previously.
At the same time, the ringgit was traded lower against Asean currencies.
The local currency weakened against the Thai baht to 13.1408/1631 from 13.0987/1151 on Friday last week, eased versus the Singapore dollar to 3.3408/3454 from 3.3393/3418 and edged down versus the Philippine peso to 8.20/8.21 from 8.19/8.20 previously.
However, it rose against the Indonesian rupiah to 291.80/292.30 from 292.20/292.60 on Friday. - Bernama
