PETALING JAYA – The ringgit is expected to strengthen further against the US dollar if the Federal Reserve presses the pause button on interest rates, which it has signalled could be increased at least two more times before the end of the year.

FXTM vice-president of corporate development and market research Jameel Ahmad said this will be supportive of the bond market.
“Any improved sentiment in the international bond market will probably lend some support to the ringgit,” he said in a statement yesterday.

At 5pm yesterday, the local currency was 0.3% higher at 4.3270 against the greenback.

Jameel said the major eye-catcher for Malaysia would be the Federal Open Market Committee’s decision at the end of its two-day meeting today, where any further indications of a future US interest rate rise would likely have a negative impact on emerging market sentiment.

“The positive news for these markets, however, is that there has been a gradual decline in US economic data of late, which is contributing to reduced expectations over the Fed pulling the trigger on additional US rate increases and this could provide some support to the emerging markets,” said Jameel.

Although the ringgit has rebounded somewhat from where it started the year, he said, it is undervalued when considering that the Malaysian economy is expanding at around 4% a year.

Despite many stock exchanges being closed on Monday due to the May Day holiday, the current week is still seen as a busy one with two major event risks from the US, including the Fed interest rate decision this evening and the non-farm payroll jobs report on Friday.

– Sundaily