Bank Muamalat Malaysia Bhd chief economist Afzanizam Rashid said the ringgit depreciated to as low as RM4.2470 to the US dollar during the morning session as worries over the impact of the 25% import tariff by the US have led traders and investors to remain cautious.
However, in the afternoon, the ringgit improved to RM4.2358.
“Generally speaking, there is still room for discussion and negotiations, and the Malaysian government continues to opt for a diplomatic solution as indicated in the investment, trade and industry ministry’s (Miti) press statement,” he told Bernama.
The US has imposed a higher tariff of 25% on all Malaysian products sent into the country, separate from all sectoral tariffs, effective Aug 1 this year.
This is one percentage point higher compared to what was announced in April.
Miti said in a statement that Malaysia is committed to continued engagement with the US towards a balanced, mutually beneficial and comprehensive trade agreement.
“Tomorrow, the main focus is on the BNM’s MPC meeting, where economists are quite divided on whether the central bank would resort to a 25-basis points cut in the overnight policy rate (OPR).
“In our view, we foresee the BNM would be inclined to reduce the OPR by 25bps in order to provide support to domestic demand.
“As such, the US dollar-ringgit is expected to maintain its narrow range as traders and investors remain cautious,” said Afzanizam.
Meanwhile, Kenanga Investment Bank Bhd retained its year-end US dollar-ringgit forecast of 4.08, supported by sound domestic fundamentals.
Eroding confidence in US fiscal management is driving capital flows towards the EU and reform-oriented emerging markets.
“Malaysia, with its macro stability and steady foreign direct investment (FDI) inflows, stands to gain from this rebalancing.
“A US Federal Reserve (Fed) pivot to interest rate cuts could further lift the ringgit,” said Kenanga in its research note today.
As for potential US tariffs targeting BRICS-aligned economies, the investment bank said any escalation could accelerate moves to develop alternative financial systems.
“Whether BRICS can parlay this into a more coherent geopolitical front remains to be seen, but their response may help reshape the future of global economic and financial architecture,” it added.
At 6pm, the local currency eased to 4.2365/4.2445 versus the greenback from yesterday’s close of 4.2310/4.2400.
The local currency traded lower against a basket of major currencies except the Japanese yen.
The ringgit appreciated versus the Japanese yen to 2.8970/2.9026 from 2.9091/2.9155 at yesterday’s close.
It eased against the British pound to 5.7591/5.7700 from 5.7563/5.7685 yesterday and declined vis-à-vis the euro to 4.9745/4.9839 from 4.9647/4.9752 previously.
Meanwhile, the ringgit traded lower against its Asean counterparts.
It declined versus the Thai baht to 13.0182/13.0488 from 12.9837/13.0173 at yesterday’s close, and slipped vis-à-vis the Singapore dollar to 3.3152/3.3217 from 3.3096/3.3172 yesterday.
The ringgit weakened against the Indonesian rupiah to 261.4/262 from 260.5/261.2 previously, and edged down versus the Philippine peso to 7.51/7.53 from 7.46/7.48 at yesterday’s close.