Ringgit opens higher following dovish US FOMC stance on inflation

THE ringgit opened stronger against the US dollar after the US Federal Open Market Committee (FOMC) adopted a dovish stance on inflation.

At 8:00 am, the ringgit strengthened to 4.4200/4305 against the greenback, compared to Wednesday’s close of 4.4330/4400.

Bank Muamalat Malaysia Bhd’s chief economist, Dr Mohd Afzanizam Abdul Rashid, tolf Bernama today that the FOMC’s decision to keep interest rates unchanged, alongside slowing the pace of its balance sheet runoff from US$25 billion to US$5 billion, signalled a dovish shift by the US Federal Reserve (Fed).

“During the press conference, Fed Chair Jerome Powell indicated that tariff-driven inflation is likely to be transitory. He also acknowledged the increasing risks of a recession but stated that they were not at an alarming level," Dr Mohd Afzanizam said in an interview with Bernama.

He further noted that the FOMC’s quarterly projections revealed that the Fed Funds Rate is expected to remain on course for two quarter-point rate cuts this year, with further reductions anticipated in 2026 and 2027.

"With this backdrop, equities rallied, and US Treasury yields fell," he added. "This should be positive for the ringgit, as the Fed has demonstrated its confidence that the US economy can weather a high degree of uncertainty caused by the erratic policy actions of former US President Donald Trump’s administration."

The economist also pointed out that the Fed’s steady approach would allow traders and investors time to reassess the prevailing pessimism, as it supports risk appetite.

"The central bank is not rushing policy changes and is instead committed to engineering a soft landing for the economy," he explained.

However, despite the positive impact of the dovish stance on the ringgit, the local currency traded mostly lower against a basket of major currencies.

The ringgit rose against the euro to 4.8231/8346 from 4.8324/8400 at the previous close but weakened against the British pound, slipping to 5.7504/7641 from 5.7496/7587. It also fell against the Japanese yen, declining to 2.9774/9847 from 2.9595/9643.

Against ASEAN currencies, the ringgit performed more positively. It gained slightly against the Singapore dollar, rising to 3.3248/3330 from 3.3251/3306 at the previous close, and strengthened against the Thai baht to 13.1622/2002 from 13.1778/2056.

The local currency also appreciated against the Indonesian rupiah to 267.3/268.1 from 268.1/268.7 and was marginally higher against the Philippine peso at 7.71/7.74, up from 7.74/7.75. – March 20, 2025