Ringgit Rises To All-Time High

By LOONG TSE MIN

PETALING JAYA: The ringgit rose to an all-time high yesterday as players sold off dollars in anticipation of a possible interest rate cut at the US Federal Reserve (Fed) Open Market Committee meeting on Tuesday.

The ringgit closed at 3.3125/3155 against the greenback compared with 3.3155/3185 on Monday. It had hit an intra-day high of 3.3100, its best level since the local currency was de-pegged.

The market largely expects a 25 basis-point interest rate cut from the Fed, which will lower interest rates and make the dollar less attractive to hold.

A chartist at a local investment bank said: “A 25 basis-point cut is already priced into the market and would unlikely cause much of a stir on Wall Street.

“Nonetheless, most investors would opt to stay on the sidelines on the off-chance that the Fed decides to surprise the market with a larger than expected rate cut of maybe 50 basis points.”

An economist interviewed earlier said the local unit (trading at 3.34 at the time) still lagged other regional currencies against the dollar in value terms on a trade-weighted basis.

“However, the appreciation must be in an orderly fashion.

“This is necessary to avoid not just currency volatility itself but also volatility in the commodities market.”

Another economist agreed, adding: “The region will be looking at the Chinese yuan. We can’t be too strong against the yuan due to export competitiveness, among other things.”

Meanwhile, AFP quoted dealers in Asian markets as saying that while a 25 basis-point cut was seen as the most likely outcome of the Fed meeting, after last week’s robust non-farm payrolls data and some stronger than expected housing data on Monday. The dealers also said a 50 basis-point cut remained a possibility as the Fed tried to fend off a severe economic slowdown.

The newswire also quoted Ashraf Laidi at CMC Markets in New York as saying: “A less generous easing (of below 25 basis points) will likely disappoint a shaky stock market and curtail risk appetite.

“Renewed selling in equities will weigh on higher yielding currencies.”

Meanwhile, the local unit ended the day mixed against other major currencies.

It firmed up against the Singapore dollar at 2.2965/3000 against Monday’s 2.3002/3039 and was stronger against the Japanese yen at 2.9579/9611 versus 2.9666/9704 a day earlier.

The ringgit, however, softened against the euro at 4.8727/8778 compared with 4.8579/8633 on Monday.

It was also weaker against the British pound at 6.7790/7865 yesterday compared with 6.7590/7644 on Monday.