Malaysia's Ringgit Set to Strengthen Further on Investment Inflows, Easier Fed Policy

By Ronnie Harui

Malaysia's ringgit has outperformed its Asian peers recently, thanks to tailwinds including looser U.S. Federal Reserve policy and foreign investment inflows.

Regional currencies have broadly been strengthening against the dollar, helped by the start of the Fed's easing cycle with a larger-than-expected rate cut last week as well as Asian economic growth and continued gains for the Chinese yuan.

But the ringgit stands out, having appreciated 14% against the dollar this quarter. The dollar was recently 0.6% lower at 4.1295 ringgit and earlier on Wednesday touched 4.1100 ringgit, its lowest intraday level since June 2021.

Last week, Malaysia's Second Finance Minister Amir Hamzah Azizan announced a slew of incentives related to the launch of Johor's Forest City as a Special Financial Zone, such as a special individual income-tax rate of 15% for Malaysians and knowledge workers. The incentives are aimed at luring capital to the $100-billion development and broaden its investor base.

Malaysia is in "pole position to attract investors and that is generating significant support" for the ringgit," according to Saktiandi Supaat, Maybank's Head of FX Research.

The greenback's recent weakness, China's latest stimulus measures such as the People's Bank of China's policy-rate cuts, and a stronger yuan have also supported the ringgit, Supaat said.

Based on technical analysis, a key level to watch could be at 4.0500 ringgit, Supaat said, adding that if the dollar falls below that, it could extend its decline to 4.0000 ringgit. Still, he warned that the dollar could bounce given how much it has already weakened against the ringgit.

Write to Ronnie Harui at ronnie.harui@wsj.com

(END) Dow Jones Newswires

September 25, 2024 02:36 ET (06:36 GMT)

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