THE RINGGIT opened higher today following the United States’ successful avoidance of a government shutdown, which has led to improved sentiment and a weaker US dollar.
The US Senate passed a Republican-backed measure last Friday to fund the government for the next six months, preventing a potential shutdown and alleviating some market concerns.
At 8 am, the ringgit traded at 4.4395/4500 against the US dollar, an improvement from last Friday’s close of 4.4410/4455.
Bernama cited Bank Muamalat Malaysia Bhd Chief Economist Dr Mohd Afzanizam Abdul Rashid attributing the positive sentiment to both the resolution of the US shutdown crisis and disappointing US economic data, which bolstered the local currency.
He pointed to the University of Michigan’s consumer sentiment index, which saw a significant drop to 57.9 points in March. This marked the third consecutive month of decline and the lowest reading since November 2022.
“This suggests that US consumers are likely to spend more cautiously, particularly as the cost of goods – especially imported ones – is expected to rise due to tariff measures imposed on Canada, Mexico, and China,” Dr Mohd Afzanizam explained. He also suggested that this economic slowdown could prompt the US Federal Reserve to consider accelerating interest rate cuts this year.
Looking ahead, traders and investors will be closely monitoring the two-day Federal Open Market Committee (FOMC) meeting, which is set to begin on March 18. While the Federal Funds Rate (FFR) is expected to remain at 4.50 percent, Dr Mohd Afzanizam noted that market attention will be focused on the Federal Reserve’s projections for the FFR, inflation, economic growth, and unemployment.
Despite the positive movement against the US dollar, the ringgit faced a mixed performance against other major currencies.
It depreciated against the euro, falling to 4.8306/8420 from last Friday’s 4.8194/8243. The ringgit also slid against the British pound to 5.7407/7543 from 5.7404/7463 and weakened against the Japanese yen, dropping to 2.9888/9960 from 2.9809/9842.
Against ASEAN currencies, the local note showed mixed results. The ringgit eased against the Singapore dollar, dropping to 3.3292/3373 from 3.3241/3277, but strengthened against the Thai baht, rising to 13.1798/2228 from 13.1820/2020. It also edged up against the Indonesian rupiah to 271.5/272.2 from 271.6/272.0 and remained flat against the Philippine peso at 7.75/7.78, unchanged from 7.75/7.77.
Meanwhile, Bloomberg cited today that the ringgit, which emerged as Asia’s top-performing currency last year, is now poised for a period of weakness as traders brace for an increased likelihood of interest rate cuts, compounded by rising trade tensions.
After maintaining a largely stable trajectory in 2025 so far, analysts from Credit Agricole and Malayan Banking Bhd predict that the ringgit may fall to as low as 4.6 per US dollar by the end of June.
The currency, however, saw a slight rebound, strengthening by 0.3% to 4.4350 in early Monday trading, partially recovering from losses incurred last week.
This outlook comes amid growing concerns about global trade tensions, which have the potential to disrupt Malaysia’s economic stability. At the same time, expectations are mounting that the central bank may consider lowering interest rates in response to slower economic growth and external uncertainties.
In the wake of these challenges, traders are closely monitoring developments in both the local and global markets, particularly as Malaysia’s currency faces pressures from both domestic factors and global economic conditions. While the ringgit had shown remarkable resilience in 2024, the shifting landscape is now prompting many to recalibrate their forecasts. – March 17, 2025
