STRONG FOREIGN INFLOWS, US RATE CUT OPTIMISM BOOST RINGGIT TO HIT FRESH SIX-MONTH HIGH - ECONOMIST

By Zufazlin Baharuddin

Continuous foreign net inflows into the Malaysian equities market, along with the United States Federal Reserve (US Fed) interest rate cut optimism, are among the reasons that propped up the ringgit to touch a fresh six-month high against the greenback, said an analyst.

The ringgit traded at 4.6590 against the US dollar at 8.44 am, reaching the highest level since 6 pm on 12th January, 2024, when it hit 4.6455, thanks to rising optimism among foreign investors towards the equities market.

At 6 pm, the ringgit closed at 4.6680.

Foreign investors remained net buyers on Bursa Malaysia for the second consecutive week, with net purchases totalling RM478.2 million last week.

Bursa Malaysia ended at a fresh three-year high yesterday after the FTSE Bursa Malaysia KLCI (FBM KLCI) settled at 1,633.54.

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid told Bernama that the rating upgrade on Malaysia by major foreign firms also positively impacted the ringgit.

Fitch Ratings has maintained Malaysia's sovereign credit rating at BBB+ with a “stable” outlook, underpinned by a diversified economy and export base.

JP Morgan has also upgraded Malaysia's rating from “underweight” to “neutral” after almost six years, crediting the country's policy reforms, data centre investments and infrastructure build-up.

Mohd Afzanizam added that the government's commitment to fiscal discipline to reduce the budget deficits has gained momentum with the recent fuel subsidy rationalisation and, soon, the implementation of e-invoicing that could increase transparency and tax compliance.

Additionally, optimism about the US interest rate cut continued to propel emerging currencies, including the local note, he said.

Media reported that the US Federal Reserve governor Christopher Waller has indicated that the time for a rate cut is approaching.

The Federal Funds Rate (FFR) is now 5.25% to 5.5%, while Malaysia's Overnight Policy Rate (OPR) in Malaysia is at 3.0%.

“This has been the primary mover for emerging market currencies as the cut in FFR would narrow the interest rate gap between the US and the rest of the region, including Malaysia,” he added.