When the Federal Reserve raised its benchmark interest rate for the first time since 2023 and signaled further tightening, the ripple reached Malaysian shores by Thursday morning — the ringgit opening softer against a dollar emboldened by the promise of higher American yields. It is an old story in the grammar of global finance: when the world's reserve currency grows more rewarding to hold, capital migrates toward it, and smaller currencies absorb the quiet pressure of that exodus. The movement was modest in number but meaningful in signal, a reminder that monetary decisions made in Washingto
Ringgit weakens as Fed's hawkish rate hike strengthens US dollar
The Fed's hawkish stance was pulling capital toward US assets.
Mark
So the Fed raised rates by just a quarter point. Why did that move the ringgit so much?
Mimi
It's not really about the size of the hike itself. It's the signal. The Fed said they're serious about fighting inflation and they're planning another hike before the end of the year. That makes US assets more attractive to investors worldwide.
Luke
But the ringgit only moved from 4.0835 to 4.0855. That's tiny—less than half a cent. Is that actually significant?
Mimi
Fair point. It's a small move in absolute terms. But in currency markets, moves of that size happen fast and matter for traders. The real story is the direction and what it signals about where things are headed.
Mark
Why does a stronger dollar hurt the ringgit specifically?
Mimi
When US interest rates go up, money flows into dollar assets. Investors sell ringgit to buy dollars. It's supply and demand. The economist quoted in the story expected it to weaken further, possibly to 4.08 to 4.10.
Luke
But he said that at the opening. Did it actually get there? The story doesn't tell us what happened later in the day or what the closing rate was.
Mimi
True. We only have the opening snapshot. The prediction was there, but we don't know if it played out.
Mark
The ringgit got stronger against the euro and yen though. How does that work if the Fed is tightening?
Mimi
Because the dollar is strengthening against everything. The ringgit is weaker against the dollar, but the euro and yen are even weaker against the dollar, so relatively speaking, the ringgit looks stronger against them.
Luke
That's an important distinction the story could have made clearer. It says the ringgit was "higher against a basket of major currencies" but doesn't explicitly say it's because the dollar was the real winner.
Mark
What about the ASEAN currencies? The ringgit was mixed against those.
Mimi
That suggests regional factors are at play too, not just the Fed. Singapore, Thailand, Indonesia, the Philippines—they all have their own central banks and economic situations. The Fed's move is the biggest force, but it's not the only one.
Luke
And we don't know how those other central banks might respond. Will they raise rates too? That could change everything for the ringgit.
Mimi
Exactly. This is a snapshot from one morning, not the end of the story.
Il Polso
- The Federal Reserve's quarter-point hike to a 3.75–4.00% target range — its first since 2023 — sent an unambiguous message: the fight against inflation is not over, and rates may climb further before year's end.
- The hawkish signal drove the US dollar index to 100.322 points and pushed Treasury yields higher, making American assets more attractive and pulling capital away from emerging market currencies.
- By Thursday's open, the ringgit had slipped to 4.0855 against the dollar, and analysts at Bank Muamalat Malaysia warned it could drift further into the 4.08–4.10 range through the trading session.
- The dollar's dominance told only part of the story — the ringgit actually gained ground against the euro, yen, pound, and several Southeast Asian currencies, revealing that the greenback's strength, not regional weakness, was the true driver.
- For Malaysian businesses, the currency shift carries tangible weight: dollar-denominated imports become costlier while dollar-denominated export revenues grow more valuable — a double-edged reality hidden inside the numbers.
When the Federal Reserve raised its benchmark interest rate for the first time since 2023 and signaled further tightening, the ripple reached Malaysian shores by Thursday morning — the ringgit opening softer against a dollar emboldened by the promise of higher American yields. It is an old story in the grammar of global finance: when the world's reserve currency grows more rewarding to hold, capital migrates toward it, and smaller currencies absorb the quiet pressure of that exodus. The movement was modest in number but meaningful in signal, a reminder that monetary decisions made in Washington are never purely domestic affairs.
The ringgit opened Thursday morning on the back foot, slipping to 4.0855 against the US dollar from Tuesday's close of 4.0835 — a modest but telling move that traced its origins to a decision made overnight in Washington. The Federal Reserve had raised its benchmark interest rate by a quarter percentage point to a target range of 3.75 to 4.00 percent, its first hike since 2023. More consequential than the number itself was the tone: Fed leadership signaled clearly that monetary policy would remain restrictive, with staff projections pointing to at least one more increase before year's end.
Dr. Mohd Afzanizam Abdul Rashid, chief economist at Bank Muamalat Malaysia, described the Fed's posture as decidedly hawkish. The dollar index rose to 100.322 points, while two-year and ten-year US Treasury yields climbed to 4.74 and 5.02 percent respectively. Higher American yields make US assets more attractive to global investors, drawing capital toward the dollar and away from currencies like the ringgit. Rashid expected the ringgit to trade between 4.08 and 4.10 against the greenback through the day.
Yet the ringgit's weakness was selective. Against the euro, yen, and British pound, Malaysia's currency actually strengthened — a pattern that pointed not to any particular vulnerability in the ringgit, but to the broad gravitational pull of a more hawkish Fed. Within Southeast Asia, the picture was similarly mixed: the ringgit gained against the Singapore dollar and Thai baht, while edging lower against the Indonesian rupiah and Philippine peso. The dominant force was unmistakably American monetary policy, with regional dynamics playing only at the margins.
For ordinary Malaysians and businesses, the technical movements carry practical weight. A weaker ringgit against the dollar raises the cost of dollar-denominated imports while improving returns on exports priced in greenbacks — a quiet but real consequence of decisions made far from Malaysian shores.
The ringgit slipped against the US dollar when trading opened on Thursday morning, caught in the undertow of a stronger greenback that had surged overnight after the Federal Reserve signaled it would keep tightening monetary policy. By 8 a.m., Malaysia's currency had weakened to 4.0855 against the dollar, down from Tuesday's close of 4.0835—a modest but telling shift that reflected broader market movements rippling out from Washington.
The Fed had raised its benchmark interest rate by a quarter percentage point to a target range of 3.75 to 4.00 percent, the first increase since 2023. What mattered more than the rate itself was the signal it sent. Fed leadership made clear during their post-meeting press conference that the central bank intended to maintain a restrictive monetary stance, keeping its focus squarely on price stability. The Fed's own staff projections suggested another quarter-point hike would come before year's end, a message that reverberated through currency markets and bond trading floors alike.
Dr. Mohd Afzanizam Abdul Rashid, chief economist at Bank Muamalat Malaysia, characterized the Fed's posture as decidedly hawkish—a term traders use when central banks signal they will keep rates elevated to combat inflation. The dollar index, a measure of the greenback's strength against a basket of major currencies, climbed to 100.322 points. Two-year and ten-year US Treasury yields both rose, climbing seven and two basis points respectively to 4.74 percent and 5.02 percent. When US interest rates rise, foreign investors find American assets more attractive, which increases demand for dollars and weakens other currencies in the process.
Rashid predicted the ringgit would trade lower throughout the day, likely settling somewhere between 4.08 and 4.10 against the greenback. The currency's weakness against the dollar, however, told only part of the story. Against other major currencies, the ringgit actually strengthened. It improved to 4.6853 against the euro from 4.7111, rose to 2.6182 against the yen from 2.6366, and climbed to 5.4672 against the British pound from 5.5037. The pattern was clear: the dollar was rising broadly, not because other currencies were particularly weak, but because the Fed's hawkish stance was pulling capital toward US assets.
Within Southeast Asia, the ringgit's performance was mixed. It gained ground against the Singapore dollar, moving to 3.1965 from 3.2093, and strengthened against the Thai baht to 12.2265 from 12.2620. But it slipped marginally against the Indonesian rupiah and edged down against the Philippine peso. These smaller moves suggested that while the Fed's decision was the dominant force shaping currency markets on Thursday morning, regional factors and individual country dynamics still mattered at the margins. For Malaysian exporters and importers, the ringgit's weakness against the dollar meant higher costs for dollar-denominated purchases and potentially better returns on dollar-denominated sales—a reminder that currency movements, however technical they seem, carry real consequences for businesses and households across the economy.
Citazioni salienti
The Fed remains committed to tightening monetary policy to achieve price stability, with a more restrictive monetary stance expected ahead.— Dr. Mohd Afzanizam Abdul Rashid, chief economist, Bank Muamalat Malaysia
Vuoi la storia completa?
Leggi l'originale su The Star ↗
Economy & Finance