Ringgit rises to near 11-month high against US dollar!

The ringgit continued its uptrend recently, closing at a near 11-month high of RM4.58 against the US dollar on 31 July 2024. An analyst said this was driven by the Bank of Japan’s (BOJ) decision to raise interest rates and the anticipation of a Federal Reserve interest rate cut in September.  The ringgit soared 315 basis points to 4.5885/5925, compared to the greenback’s closing of 4.6200/6235 on Tuesday (July 30).

UOB Kay Hian Wealth Advisors head of investment research said the BOJ’s move signalled confidence in Japan’s economic recovery, and it could bolster investor confidence in Asian currencies, if the positive sentiment extends to global markets. 

Attractive interest rates in Japan might encourage investors to seek higher yields elsewhere, including in emerging markets like Malaysia. As investors diversify their portfolios, capital inflows into Malaysian assets can further strengthen the ringgit.

The Federal Open Market Committee (FOMC) is expected to announce their decision soon, with most consensus projecting no change in the Fed Fund Rate.

Meanwhile, the local note traded mostly higher against a basket of major currencies. The ringgit rose against the British pound to 5.8875/8926, from 5.9427/9472, and was higher against the euro to 4.9680/9723, from 5.0044/0082. However, it fell against the Japanese yen to 3.0515/0545, from 2.9845/9870. 

It rose against the Indonesian rupiah to 282.1/282.5, from 283.3/283.7, improved against the Singapore dollar to 3.4273/4306, from 3.4370/4398, and inched up against the Philippine peso to 7.86/7.87, from 7.87/7.89 previously. The ringgit slipped vis-a-vis the Thai baht to 12.8717/8880, from 12.8319/8470.

Whatever the case, OPR remaining unchanged will not help the ringgit. If you want the ringgit to appreciate significantly (to RM4.0 to USD1) the OPR must move up.  But that hampers GDP growth? True, that has an impact. But food imports will soar if ringgit depreciates. So, BNM must balance its interest rate policy and  growth for a desired ringgit exchange rate.

Reference:

Ringgit rises to near 11-month high against US dollar on July 31, 2024, Karina Imran, Bernama / TheEdgeMalaysia, 1 August 2024