Ringgit rallies to six-week high at 4.18 on US Fed rate cut bets, solid local outlook
The local note opened at 4.2045/2160 today compared to Wednesday's close of 4.2040/2085, before appreciating to 4.1865 as of 9.59am.
The last time the ringgit traded at a similar high was on July 1, when it touched 4.1805.
UOB Kay Hian Wealth Advisors Sdn Bhd head of investment research Mohd Sedek Jantan said the ringgit's position around the 4.20 mark is both technically and psychologically significant for the market.
'While 4.20 is not a hard technical pivot in the strict chartist sense, it represents a symbolic benchmark for investor sentiment, particularly as the last sustained levels below this mark were seen in early July.
'A decisive break and hold below 4.20 would reinforce the view that the currency has entered a new appreciation phase,' he told Bernama.
He attributed the ringgit's recent strength to market optimism that the Fed will deliver at least two rate cuts before year-end, with further easing likely to continue into 2026.
This follows US Treasury Secretary Scott Bessent's call yesterday for the Fed to lower its benchmark rate by at least 1.5 percentage points, reinforcing market expectations of a more aggressive easing cycle, he said.
Mohd Sedek said external factors are being complemented by domestic catalysts, particularly the 13th Malaysia Plan announcement, outlining clear policy directions, targeted investment incentives and sectoral development plans.
These, he added, could bolster investor confidence, enhance capital inflows and strengthen the ringgit's fundamentals.
'Malaysia's steady gross domestic product growth, a resilient current account surplus and improving foreign investment momentum, particularly in high-value sectors such as electrical and electronics, renewable energy and data centres, provide a solid domestic foundation for currency appreciation,' he said.
Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid shared a similar view, describing the current ringgit level as 'more of a psychological marker' as sentiment turns increasingly positive.
'We now have two dissenters in the Federal Open Market Committee who favoured a rate cut in the July meeting, and the US labour market is showing signs of weakness, judging from the significant downward revision in US non-farm payrolls.
'Inflation is fairly stable, and the US Treasury has even suggested a 50-basis-point cut could happen in the September meeting. This is essentially ringgit-positive or dollar-negative,' he said.
Looking ahead, Mohd Sedek forecasts the ringgit to strengthen to 4.10 by the end of 2025 and extend its uptrend towards 4.05 by the end of the first quarter of 2026.
'If the ringgit decisively holds below 4.20 in the coming weeks, the next levels to watch will be 4.18 and 4.15. A sustained move below 4.15 would confirm the structural shift towards our 4.05 target,' he added. — Bernama
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