KUALA LUMPUR: The ringgit rose to a high of 4.1217 against the US dollar on Thursday after US Federal Reserve chairman Jerome Powell indicated a cut in interest rates.
At 12.30pm, the ringgit was up 0.34% to 4.1230 -- the highest since April 16.
The Federal Reserve is preparing to cut interest rates for the first time in a decade because it sees a cooling global economy and no sign of overheating in the jobs market at home, Reuters reported.
Bernama earlier reported more investors had shifted interest away from the safe haven due to concerns on the global economic outlook.
The question remains whether the US Federal Reserve will be cutting its policy rate by 25bps or 50bps, says Ambank research.
It said in a note that the Fed has opened the door for a rate cut while China's authorities may embark on more aggressive stimulus as June factory gate data pointed towards a deflationary trend.
However, Ambank does not foresee large-scale fiscal stimulus.
"We foresee more ‘offbalance sheet’ fiscal support to come into the picture to support growth and implement financing tools like reserve requirement ratio cuts to support small and private firms.
"Room for two 50 bps cut in reserve requirement ratio to take place in 3Q and 4Q is on our cards," it said.
The research house expects the ringgit to trade between its support level of 4.1128 and 4.1216 while its resistance is pinned at 4.1344 and 4.1388.
Looking ahead, it said its focus will be on the US's June core consumer price index with expectations set at 2% growth year-on-year.
Stephen Innes, managing partner at Vanguard Markets Pte Ltd, said the dollar continues to trade soft in the wake of the FOMC minutes and the Humphrey Hawkins Testimony.
"And for the sake of good order, St. Louis Fed President Bullard reiterated that he would like to take out insurance against much slower economic growth and low inflation.
"We are now beyond the realm of a 25 bp cut, the market's pricing in about 65% chance of a 50bp cut at the July FOMC meeting heading into to tonight’s key US CPI print," he said in a note to clients.