Could rising US Treasury yields weaken the ringgit further?

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Rising US Treasury Yields Pose a Risk of Further Weakening for the Ringgit

Rising US Treasury yields present a significant risk of further weakening the Malaysian ringgit. This concern is amplified by the potential for the United States to maintain its current interest rate levels throughout 2024, a scenario that could exacerbate downward pressure on the ringgit.
Increase in US 10-Year Treasury Yields

The yields on US 10-year Treasuries have demonstrated a notable upward trend. Specifically, these yields climbed from 4.19 per cent on March 1 to 4.42 per cent as of the report's publication. This movement follows a low point for the year of 4.09 per cent, observed in January, indicating a period of increasing returns for US debt.
Impact of Strong US Economic Data and Inflation

Should economic data from the United States continue to exhibit strength, coupled with persistent signals of sticky or rising inflation, the ringgit's value could be significantly impacted. This economic environment could lead to a scenario where the US Federal Reserve opts against any interest rate cuts in 2024, a development that would likely result in the ringgit trading at considerably weaker levels.
Potential for a "No Rate Cut" Scenario in 2024

A key factor contributing to the potential weakening of the ringgit is the possibility of the US entering a "no rate cut" scenario for the entirety of 2024. If inflation remains stubbornly high and US economic indicators continue to be robust, it becomes less likely that the Federal Reserve will lower interest rates. This would maintain higher borrowing costs in the US, making dollar-denominated assets more attractive and potentially drawing capital away from emerging markets like Malaysia, thereby pressuring the ringgit.

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Could rising US Treasury yields weaken the ringgit further?

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