KUALA LUMPUR: The Malaysian ringgit has the potential to climb further to the 3.78 level against the US dollar following the US Supreme Court’s decision to strike down President Donald Trump’s tariff policy, with the move seen benefiting emerging markets like Malaysia.
This is on the view that the new tariff schedule of 15 per cent, which Trump announced soon after the court struck down his earlier International Emergency Economic Powers Act (IEEPA)-based tariffs last Friday, benefits emerging markets over developed markets, according to a report by CIMB Treasury and Markets Research.
The exporter gap between the Group of 10 (G10) industrialised countries and Asian economies would narrow, it said in a research report today.
This is good news for Malaysia as the ringgit, which today opened at an eight-year high of 3.8885 versus the US dollar, is set to gain further, which economists say would provide further economic stability.
In reiterating that the new US tariff schedule benefits emerging over developed markets, CIMB Treasury and Markets Research said it narrows the relative G10 outperformance against Asian exporters, currently at 62 basis points (bps), though spreads in the emerging market twin-deficit basket may remain wide at 413 bps.
Policymakers might also allow further gains on the US dollar to blunt US claims of current account imbalances, whereby this convergence could extend gains for the ringgit with a targeted level of 3.78, with revised forecasts adding a one to two per cent upside.
The research note also said that the renewed uncertainty over tariff rates bolsters Bank Negara Malaysia’s stance in maintaining last year’s pre-emptive overnight policy rate (OPR) cut to 2.75 per cent.
At this stage, any potential boost to export growth from lower effective tariff rates is marginal, it said, adding that conversely, the tail risk from higher Section 232 tariffs on products such as semiconductors bears watching as a potential drag. - Bernama
