KUALA LUMPUR, March 22 — The ringgit extended its uptrend against the US dollar for the third consecutive day on the expectation of a softer interest rate hike by the US Federal Reserve (Fed) later tonight and even a possible cut in the second half of the year.
At 6pm, the local note rose to 4.4530/4580 versus the greenback compared with yesterday’s closing rate of 4.4690/4715.
Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid said the markets have been quite fickle-minded about the US interest rate outlook with interest rate futures for Fed funds rates indicating a possible cut in the second half of 2023 (2H2023).
“Recent events in the US banking sector serve as a reminder that the outlook is still cautious and this begs the question of whether raising interest rates further is the right thing to do for the Fed,” he told Bernama.
Mohd Afzanizam said the question on interest rates is critically important, as the US Treasury yield curve is inverted with the three-month yield higher than the 10-year yield — a phenomenon that is closely associated with a possible recession.
“The US Treasury yield continues to remain inverted with the three-month yielding 4.57 per cent versus the 10-year yield of 3.59 per cent, giving a negative spread of 98 basis points. Typically, the inverted yield curve is a sign of a higher probability of recession in the US,” he added.
Mohd Afzanizam also noted the US dollar has broken through the immediate support level of RM4.4728 and the next support level is at RM4.4076.
“As such, the ringgit could stage further appreciation should the Fed turn dovish tonight,” he said.
Meanwhile, the ringgit was traded higher against a basket of major currencies.
The local note appreciated versus the British pound to 5.4696/4758 from 5.4759/4789 at yesterday’s close, crept up vis-à-vis the euro to 4.8026/8080 from 4.8028/8055 and strengthened against the Japanese yen to 3.3592/3633 from 3.3807/3829 previously.
At the same time, the ringgit was traded higher against Asean currencies.
The local currency gained against the Thai baht to 12.9297/9506 from 13.0166/0311 on Tuesday, firmed against the Indonesian rupiah to 290.10/290.60 from 291.10/291.50 and strengthened versus the Singapore dollar to 3.3363/3406 from 3.3423/3444.
It moved up versus the Philippine peso to 8.16/8.18 from 8.21/8.22 previously.