Ringgit gains as US debt weighs on greenback, easing rate hike expectations
The Malaysian ringgit strengthened against the US dollar as concerns over rising US government debt reduced expectations of a Federal Reserve interest rate hike. Economists suggest the currency's performance is tied to interest rate differentials and the weakening US Dollar Index.
Why it matters
Currency fluctuations impact international trade and investment flows, reflecting broader concerns about US fiscal stability and global monetary policy.
KUALA LUMPUR: The ringgit opened higher against the US dollar on Thursday as concerns over the rising US government debt weighed on the greenback, dimming expectations of a US interest rate hike, an economist said.
At 8 am, the local currency strengthened to 4.0455/0540 against the greenback from Wednesday’s close of 4.0565/0610.
Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam said US government debt is currently in the spotlight, with public debt outstanding having crossed US$40 trillion, surging by a third in less than five years.
"This happened at a time when the US Treasury Department attempted to bring down long-term yields via direct intervention in the bond market,” he told Bernama.
He said that if the US Federal Reserve (Fed) opts to raise the interest rate in the near term, it could further undermine the US government's ability to repay its debt obligations.
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