Could Fed rate cuts in September strengthen the ringgit?

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Fed Rate Cut Expectations Could Bolster the Ringgit

The Malaysian ringgit is projected to trade within the 4.25 to 4.26 range against the US dollar in the upcoming week. This outlook is influenced by weaker-than-expected US Nonfarm Payrolls (NFP) data for July, which has fueled speculation that the US Federal Reserve (Fed) might consider an interest rate cut at its September meeting. The NFP figures revealed an addition of only 73,000 jobs, falling short of the 106,000 consensus, and further downward revisions to the May and June job numbers reinforce the possibility of such a monetary policy adjustment by the Fed.
Impact of Weaker US Payrolls Data

The release of the July NFP data, which showed a significant shortfall in job creation, is seen as a potential catalyst for strengthening the ringgit. Chief economist at Bank Muamalat Malaysia Bhd, Mohd Afzanizam Abdul Rashid, indicated that this economic indicator could improve sentiment towards the ringgit by increasing the likelihood of a Fed rate cut in September. The trend of revised lower job numbers for May and June further solidifies this expectation, suggesting a cooling US labour market that might prompt the Fed to ease monetary policy.
Trade Tariff Adjustments and Ringgit Sentiment

In addition to monetary policy signals, recent trade developments could also offer support to the ringgit. The US government's decision to reduce the reciprocal tariff imposed on Malaysia to 19 per cent, down from a previous 25 per cent, is viewed as a positive step. This adjustment may help to mitigate the adverse effects of trade tensions and potentially lead to improved trade arrangements over the medium term, which could, in turn, benefit the ringgit's performance.
Long-Term Support from the 13th Malaysia Plan

Looking further ahead, the recently unveiled 13th Malaysia Plan (13th MP) is anticipated to provide sustained support for the ringgit. With an allocation of RM430 billion for development expenditure, the plan is designed to stimulate domestic demand and encourage investment activities. Such measures are expected to bolster economic growth and contribute positively to the ringgit's stability and strength in the medium to long term.

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Could Fed rate cuts in September strengthen the ringgit?

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