‘Fed move to affect ringgit rally’
KUALA LUMPUR: The United States Federal Reserve’s (Fed) interest rate hike decision will be the major eye-catcher for Malaysia as it may have a negative impact on emerging market sentiment.
But Cyprus-based ForexTime Ltd (FXTM) said the positive news was that there had been a gradual decline in US economic data of late.
This would reduce expectations of the Fed pulling the trigger on more rate increases and provide support for emerging markets, it added.
“Although the ringgit has now rebounded somewhat, I believe it is undervalued when considering the economy is expanding at around four per cent,” said its vice-president of corporate development and market research Jameel Ahmad.
The ringgit could gain further strength if the Fed were to hint that recent weaknesses in the US economic data would give it pause in raising rates another two times by year-end, he added. This will also be supportive of the bond market.
Jameel said FXTM had seen in the past that foreign investors were attracted to Malaysian bonds, meaning that an improved sentiment in the international bond market would likely lend support to the ringgit.
According to a Bloomberg report yesterday, the ringgit had clambered aboard the Asian currency rally, advancing against the US dollar and spurring flows into equity markets.
Although the ringgit has now rebounded... it is undervalued when considering the economy is expanding at around four per cent.