The Malaysian ringgit was on a tear on Thursday amid buoyant emerging Asian currencies, while share markets rose, with investors cheering a possible end to the US Federal Reserve’s restrictive policy settings in September.
Malaysia’s currency advanced as much as 1% to trade at 4.545 per dollar, its highest in a year. Others such as the Thailand baht, Taiwan dollar and the South Korean won traded up to 0.5% higher.
The baht was on course to rise a seventh consecutive day.
A period of political stability and the need for global companies to diversify their supply chains beyond China has put Malaysia in the limelight.
“The ringgit is probably performing catch-up because it was one of most underperforming currencies recently, and it has been undervalued for a long time,” said Chief FX Strategist Saktiandi Supaat at Maybank.
The Federal Reserve held interest rates steady overnight but kept the doors open for a cut in September, provided the US economy “follows its expected path”.
The MSCI International Emerging Markets Currency Index rose as much as 0.3%, hitting its highest since mid-July and up for a third straight session.
Soft dollar keeps yen aloft as Fed hints rate cuts on the way
Analysts now expect Asian central banks to start easing policy stances in the near-term as inflation is set to remain low. The Philippines is likely to kick off the rate-cutting cycle, followed by South Korea, India and Taiwan.
Investors will also await inflation data from South Korea on Friday to gauge the trajectory of interest rates, while Indonesia’s price pressures eased for July.
“We think the central bank in the Philippines will be the next to loosen policy and have pencilled in an August cut,” analysts from Capital Economics wrote.
“Overall, we expect most central banks to cut rates by 50bps-200bps between now and the end of next year,” they said.
Among Asian equities, shares in Taipei climbed as much as 2% to reach a one-week peak, riding the artificial intelligence boom caused by chip giant Nvidia. Taiwan Semiconductor Manufacturing, Asia’s most valuable stock, added as much as 3.8%.
Other bourses in Bangkok, Manila, Seoul and Jakarta rose between 0.5% and 0.8%.