Fed’s cut and dovish pivot anchors USDMYR below 4.20
Performance: As projected in our previous note, the ringgit strengthened ahead of the FOMC, touching 4.19/USD.
Market Dynamics: Domestic trading was muted in the holiday-shortened week, but the ringgit extended its gains from 4.20/USD on Friday to 4.19/USD by Wednesday. The driver was a weaker dollar: the DXY slipped below 97.0 on Tuesday as investors positioned ahead of the Fed’s rate cut. The dollar fell further after the 25 bps cut and a dot plot signalling two more cuts this year. Yet it quickly rebounded after Powell’s press conference, where he left open the impact of tariffs on prices and stressed lingering inflation risks. His description of the move as a “risk-management cut” may also have tempered the dovish signal from the dot plot.
Data Impact: Markets will keep hunting for signs of softer labour data to validate expectations of further easing. Next week, the focus will be on Friday’s core PCE, with consensus at 0.2% MoM or 2.9% YoY. A higher print could blunt hopes of near-term cuts. Housing data will also be watched for signs of weakness, which could shape expectations on the pace of easing.
Download Full Content:
