Market concerns over US interest rate may halt ringgit uptrend


The main underlying issue continues to revolve around a possible earlier interest rate hike in the US with a slew of Federal Reserve officials rooting for the removal of monetary policy accommodation. As such, the US FOMC meeting starting tomorrow will be the main focus, Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid told Bernama.

KUALA LUMPUR: The ringgit is expected to linger at the current 4.18 level versus the United States dollar as investors would be weighing on the outcome of the United States Federal Open Market Committee (FOMC) meeting this week.

The main underlying issue continues to revolve around a possible earlier interest rate hike in the US with a slew of Federal Reserve officials rooting for the removal of monetary policy accommodation.

As such, the US FOMC meeting starting tomorrow will be the main focus, Bank Islam Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid told Bernama.

Having said that, he said the stance by Bank Negara Monetary Policy Committee (MPC) on economic conditions could well drive an uptrend for the ringgit throughout this year.

“Judging from the MPC meeting (on Jan 20), Bank Negara is comfortable with the present state of the economy. Should it continue to remain so, there could be a chance that the overnight policy rate (OPR) to be raised at some point this year,” he noted.

At the first MPC meeting for 2022, the central bank kept the OPR unchanged at 1.75%, with a likely 25 basis points increment in the second half of 2022.

Bank Negara’s continuous positive tone and latest inflation data have helped the ringgit trade firmer on Thursday and Friday.

He said December’s Consumer Price Index (CPI) for December 2021 came in stable at 3.2% compared to 3.3% in November 2021.

Overseas, the sharp rise in US Treasury yields, equities sell-off, and China’s cutting down on their policy rate were amongst the key factors that affected the currency market last week. The ringgit trended mixed versus the greenback throughout the trading week.

It finished the week lower at 4.1840/1870 against the US dollar compared with 4.1765/1795 at the previous Friday’s close.

The local currency was also traded lower against other major currencies on a Friday-to-Friday basis. It depreciated against the Singapore dollar to 3.1096/1121 from 3.1045/1070 on the previous Friday and weakened vis-a-vis the Japanese yen to 3.6715/6741 from 3.6675/6704.

However, the ringgit gained versus the euro to 4.7434/7468 from 4.7846/7880 a week earlier and strengthened against the British pound to 5.6764 and 6805 from 5.7339 and 7380 previously.

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Ringgit , US , dollar Fed , interest rate

   

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