What is the potential impact if the US Federal Reserve raises rates to 3.5%?

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Potential Ringgit Depreciation if US Federal Reserve Raises Rates to 3.5%

The Malaysian ringgit could see further depreciation and move towards the 4.6000 level against the US dollar if the US Federal Reserve implements an interest rate hike to 3.5 per cent annually. This scenario presents a potential downside risk for the local currency, which has already experienced a weakening trend.
Anticipated Federal Reserve Interest Rate Decision

The US dollar has maintained a bullish trajectory in anticipation of the Federal Open Market Committee's (FOMC) interest rate decision. Market expectations point towards a 75-basis point increase, bringing the benchmark rate to 3.25 per cent. This anticipated move has already been factored into current market pricing for the dollar.
Impact of a Higher-Than-Expected Rate Hike

Should the US Federal Reserve exceed market expectations and raise interest rates to 3.5 per cent, the dollar's upward momentum against the ringgit is likely to persist. This outcome would suggest that the market has not fully priced in such an aggressive monetary tightening, leading to continued strength in the greenback.
Ringgit's Performance Against Other Currencies

In parallel with its movement against the US dollar, the ringgit exhibited mixed performance against other major currencies. It depreciated against the Japanese yen and the Singapore dollar. However, the ringgit saw gains against the British pound and the euro during the same period.

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What is the potential impact if the US Federal Reserve raises rates to 3.5%?

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