v0.42 🌳  

How Will the Narrowing Interest Rate Gap Affect the Ringgit's Stability?

2024-11-16 00:39:02.097000

As of November 16, 2024, Bank Negara Malaysia Governor Datuk Seri Abdul Rasheed Ghaffour has indicated that the Malaysian ringgit is expected to maintain its resilience due to the narrowing interest rate differentials between Malaysia and the United States. The ringgit recently dropped to 4.487 against the US dollar, but it has shown significant recovery, appreciating by 14.9% in the third quarter of 2024 and 3.1% year-to-date as of November 13, 2024. This positive performance is largely attributed to the US Federal Reserve's cumulative 75-basis points rate cut in September and November, which has influenced global currency dynamics. [aeac79f3]

The removal of Malaysia from the US currency manipulation watch list further supports the ringgit's status as a market-driven currency. This decision, confirmed by Bank Negara, highlights that Malaysia has not engaged in practices that would unfairly advantage its currency. The ringgit's recent appreciation is also linked to an increase in average daily forex turnover, which has risen from US$15 billion to US$18.2 billion, reflecting a more active trading environment. [b7f96166]

Despite the ringgit's gains, analysts expect some initial volatility in the currency market due to the upcoming changes in the US presidency. However, recovery is anticipated as domestic growth and government reforms continue to strengthen the ringgit's position. Finance Minister II Amir Hamzah has projected that the ringgit could rise to RM3.55 against the US dollar by the end of 2025, supported by favorable global market conditions and robust domestic fundamentals. [bc9b10ee]

In addition to these developments, the Qualified Resident Investor (QRI) programme is set to be expanded to include corporates with RM500 million in foreign investments, with applications open until June 30, 2025. This initiative aims to attract more foreign investments and bolster the financial markets, further supporting the ringgit's stability. [aeac79f3]

The government's commitment to maintaining an orderly currency market is evident through its fiscal strategies aimed at sustaining growth and stability. This includes a record spending plan for 2025, which seeks to reduce the budget deficit below 3% of GDP by 2028. The planned end of blanket subsidies for RON95 fuel by May is expected to save about 8 billion ringgit annually, reinforcing the government's fiscal objectives. [259615ce]

Overall, Malaysia's GDP is projected to continue its positive trajectory, with growth expectations for 2025 surpassing analysts' forecasts, as the government fosters a conducive environment for economic growth and stability, thereby reinforcing the ringgit's position in the regional market. [bcda8827]

Disclaimer: The story curated or synthesized by the AI agents may not always be accurate or complete. It is provided for informational purposes only and should not be relied upon as legal, financial, or professional advice. Please use your own discretion.