Ringgit extends gains against US dollar after Fed holds interest rates

The Malaysian ringgit extended its recent gains against the US dollar after the Federal Reserve decided to keep the benchmark interest rate unchanged at 3.75% to 4% on Thursday. At 6pm, the ringgit reached 4.0575/4.0620 against the US dollar, up from the previous close of 4.0745/4.0790. Bank Muamalat Malaysia Bhd chief economist Afzanizam Rashid explained that market participants would be watching the US Federal Reserve's preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, scheduled for release later on the same day.

The index is expected to increase to 3.1% in September, up from 3% in the previous month. Rashid noted that the US Federal Reserve might resume its rate-hiking cycle in December if inflation remains elevated in the near term. However, he emphasized that monetary policy decisions remain dynamic, and the anticipation of a 25 basis point hike in December was not a certainty.

The weak consumer confidence and the higher cost of living, which impacts purchasing power, could lead to reduced spending in the future, potentially affecting the ringgit's performance. Against major currencies, the ringgit strengthened against the British pound, rising to 5.4009/5.4069 from 5.4130/5.4190; against the euro, it climbed to 4.5176/4.5226 from 4.5337/4.5387; and against the Japanese yen, it advanced to 2.5685/2.5715 from 2.5812/2.5843.

Additionally, the ringgit showed strength against its Asean peers, including the Singapore dollar, Indonesian rupiah, Thai baht, and Philippine peso.