‘Sweet spot’ economy gives ringgit a lift at open after BNM rate hold

KUALA LUMPUR, Sept 4 — The Malaysian ringgit began the trading day on a stronger note against the US dollar on Friday, as investor sentiment improved following the decision by Bank Negara Malaysia (BNM) to hold its overnight policy rate (OPR) steady at 2.75 per cent. By 8am, the local currency had climbed to 4.0370/0420 against the greenback from its previous close of 4.0405/0445 on Thursday.

Thursday saw the Bank Negara Monetary Policy Committee (MPC) announce that the OPR would remain unchanged at 2.75 per cent. Dr Mohd Afzanizam Abdul Rashid, Chief Economist at Bank Muamalat Malaysia Bhd, suggested that BNM's decision to maintain the OPR amid robust economic growth and relatively stable inflation indicated the Malaysian economy was operating in a "sweet spot".

This favorable economic situation, Dr Afzanizam explained to Bernama, provides a cushion for the ringgit, as BNM retains policy flexibility that could attract more investors holding ringgit. Furthermore, the ringgit also received a boost from a weaker US dollar, following remarks by US Federal Reserve (Fed) Governor Christopher Waller on Thursday.

Waller's comments suggested that he would favor maintaining interest rates unchanged if inflation continued to ease towards the Fed's two per cent target, which could increase pressure on the US dollar and further strengthen the ringgit. The local currency weakened against other major currencies in the same trading session, falling against the Japanese yen, British pound, and euro, as well as regional currencies such as the Singapore dollar and Thai baht.

However, it remained relatively stable against the Philippine peso and strengthened against the Indonesian rupiah.