US interest rates assume major role in ringgit fluctuation
KUALA LUMPUR: Investors will closely scrutinise any policy statement from the US Federal Reserve (Fed) for additional clues on its future plans and this will play a major role in how the ringgit fluctuates in the coming weeks.
FXTM research analyst Lukman Otunuga said a sense of caution seems to be the theme for financial markets as trading gets underway and investors prepare for an incredibly busy week, packed with both crucial economic reports and major risk events.
This includes, the ongoing Organisation of the Petroleum Exporting Countries (OPEC) meeting and forthcoming US Federal Reserve interest rate decision, he said in a statement yesterday.
“While OPEC is still of importance to emerging markets like Malaysia, the ringgit and Malaysian markets in general will be paying closer attention towards any decision on future US interest rate hikes.
“Although it is pretty much confirmed that the Fed will leave US interest rates unchanged this month, investors will, nevertheless, closely scrutinise the policy statement for additional clues,” said Otunuga.
If the policy statement main- tains a hawkish bias towards raising US interest rates again before the year-end, emerging markets could come under some pressure with the Malaysian ringgit fitting into the same category.
However, he pointed out that sentiment towards the US dollar has turned very sour in recent weeks and only a significant change in tone from the Fed would encourage investors to accumulate their greenback positions, against a backdrop of political uncertainty continuing to dominate events in Washington.
Otunuga also said investor sentiment for the ringgit remained intact as it was being supported by Malaysia’s improving economic conditions. — Bernama