25-5-2023 (Kuala Lumpur) The Malaysian ringgit remains sluggish against the backdrop of expectations for the US Federal Reserve to raise interest rates, causing US debt yields to climb. Meanwhile, the US dollar index continues to strengthen. Against the Singapore dollar, the Malaysian ringgit has hit consecutive record lows, with the exchange rate dropping to as low as 3.4188.
Following recent lows of 3.3981 and 3.4116 ringgits against the Singapore dollar, the Malaysian ringgit started the day with a decline in early trading. It briefly rebounded to 3.4046 ringgits from the previous day’s closing price of 3.4106 ringgits (24th). However, the ringgit quickly reversed its course, plummeting to 3.4188 ringgits, setting a new record low.
At 11 am, the exchange rate of the Malaysian ringgit against the Singapore dollar stood at 3.4160 ringgits.
Driven by the strong US dollar trend, the Malaysian ringgit opened lower against the US dollar, starting at 4.5947 ringgits. It continued to slide, reaching as low as 4.6205 ringgits, the lowest level in the past six months. As of 11:00 am, the Malaysian ringgit stood at 4.6175 ringgits against the US dollar, compared to Wednesday’s (25th) closing rate of 4.5920 ringgits.
Mohamed al-Fani, head of economic and market analysis at Muamalat Bank, explained to Bernama that the impasse in the US debt ceiling and the Fed’s interest rate hike are impacting traditional assets. Although US stocks closed lower, US debt yields rose. The minutes of the Federal Open Market Committee (FOMC) meeting revealed a division among members regarding interest rate hikes, but in the latest meeting, all members agreed unanimously to continue raising rates by 25 basis points.
Given the current polarized political landscape in the United States and the uncertainty surrounding the US debt ceiling, decision-making may face delays from ruling and opposition parties. Consequently, the US dollar index has risen, leading to further weakness in the Malaysian ringgit against the US dollar.
