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Malaysia: Ringgit slightly stronger in anticipation of rate cuts
KUALA LUMPUR: The ringgit opened slightly higher against the US dollar amid growing expectations that Bank Negara Malaysia (BNM) and the US Federal Reserve would cut interest rates soon.
The local note stood at 4.2100/2150 against the greenback from 4.2120/2180 recorded at 6 pm Friday.
AxiCorp chief market strategist Stephen Innes said BNM could cut its policy rate by 25 basis points during the Monetary Policy Committee (MPC) meeting tomorrow.
“And repricing expectations for lower growth not just in the first quarter, but also in the second quarter as the impact from the COVID-19 outbreak and ongoing political uncertainty weighs on economic growth structures” he added.
He said many countries and Malaysia could continue to struggle from the lingering effect of China’s demand, disruptions in the supply chain linkages and tourism amid the COVID-19 pressure.
“BNM rate cut tomorrow perhaps will help market sentiment along with the ringgit, which at the moment is trading hypersensitive to the growth outlook,” he added.
In addition, he believes foreign investors may have become somewhat desensitised of the political landscape after the appointment of eight Prime Minister Tan Sri Muhyiddin Yassin.
Innes said the market is also expecting the US Federal Reserve to cut interest rates by 25 basis points at each of the next two rate cut decisions.
“Depending on the severity of the economic impacts of the spread of the COVID-19, there is certainly scope for more stimulus. So, chair Jerome Powell’s unusual statement last Friday afternoon likely marked a turning point in the Fed’s tone concerning the potential for near-term policy action, probably as soon as the March 18 meeting or even before,” he noted.
The ringgit was mostly lower against other major currencies.
It fell against the Singapore dollar to 3.0240/0280 from 3.0215/0269 on Friday and decreased versus the Japanese yen to 3.9119/9177 from 3.8749/8815 previously.
The domestic unit eased against the euro to 4.6550/6622 from 4.6517/6588 but gains vis-a-vis the British pound to 5.3939/4011 from 5.4343/4438 recorded last Friday. – Bernama
Source: https://www.thestar.com.my/business/business-news/2020/03/02/ringgit-slightly-stronger-in-anticipation-of-rate-cuts