KUALA LUMPUR: The ringgit shrugged off the surprise interest rate cut by Bank Negara Malaysia (BNM) to close higher versus the US dollar today, dealers said.
The central bank’s Monetary Policy Committee today reduced the overnight policy rate (OPR) to 2.75% from 3.0% as a pre-emptive measure to secure improving growth trajectory amid price stability.
At 6pm, the ringgit was quoted at 4.0650/0680 against the greenback, compared with 4.0710/0740 on Tuesday.
Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said the foreign exchange markets’ expectation of a better economic growth story had helped to support the ringgit to move upwards.
He said although the decision for the OPR cut had caught the markets off-guard as the rate cut was expected to come in May after the FTSE Russell review in March, the current monetary stance is appropriate in sustaining economic growth with price stability.
“The central bank is very mindful on the external developments and would be data-dependent in deciding their next course of actions.
“We believe inflation is not an issue given that the government has decided to put on hold the targeted fuel subsidy programme indefinitely,“ he told Bernama.
Mohd Afzanizam added that the room for additional OPR reduction is now widely open, but at this juncture, believed that BNM would maintain the prevailing OPR throughout the year subject to the evolving economic outlook globally.
Meanwhile, FXTM market analyst Han Tan said the ringgit strengthened against the US dollar in line with most Asian currencies.
“The ringgit is expected to remain driven by external factors, including market risk sentiment, the US dollar and Chinese yuan performance, as well as the global economic trajectory,“ he said.
Overall, the ringgit was also traded higher against other major currencies, except the British pound.
It was higher against the Singapore dollar at 3.0122/0156 versus 3.0160/0193 on Tuesday, and appreciated against the Japanese yen to 3.6965/6995 versus 3.7016/7057.
The local currency rose against the euro to 4.5077/5126 compared with 4.5147/5189 but slipped against the British pound to 5.3085/3140 from 5.3078/3133 yesterday. - Bernama