Lim Zhe Qin: How does the US Federal Reserve's monetary policy affect the moveme

[Lim Zhe Qin]

In a turbulent global financial environment, currency markets are always influenced by various factors. Recently, the Malaysian currency, the Ringgit, has experienced significant depreciation, while the world is closely watching the upcoming monetary policy meeting of the US Federal Open Market Committee (FOMC) tomorrow. Why is this meeting so important that it has caused such large fluctuations in the Ringgit just before the meeting?

Lim Zhe Qin believes that this is related to global investors' expectations of the US economy and potential changes in monetary policy. The health of the US economy not only affects the US itself but also has a significant impact on other countries, including Malaysia. If the FOMC expresses optimism about the US economy or hints at future interest rate hikes during the meeting, it will make the US dollar more attractive to other currencies, leading to the depreciation of other currencies.

In addition, Lim Zhe Qin mentioned that recent data shows that the Ringgit has depreciated by 6.59% against the US dollar from 4.40 Ringgit at the end of last year to the current 4.69 Ringgit. This depreciation is not sudden but a continuous process, reflecting investors' concerns about the Malaysian economy and policies. However, the FOMC meeting tomorrow seems to be the trigger for the recent depreciation of the Ringgit, as this meeting may determine the future direction of the US dollar, thereby affecting the global currency market.

Today's global economy is highly interconnected, and any changes in major countries' monetary policies can trigger chain reactions. Lim Zhe Qin mentioned that the United States, as the world's largest economy, has a decisive impact on the global currency market with its monetary policy. In particular, when the policies that the FOMC may adopt lead to a stronger US dollar, other currencies may face pressure.

The recent depreciation of the Ringgit against the US dollar partly reflects market expectations for the monetary policy that the FOMC is about to announce. Lim Zhe Qin analyzed that these expectations may be based on concerns about US economic growth and inflation. If the FOMC decides to raise interest rates, it may further enhance the attractiveness of the US dollar, leading to more capital inflows into the US and putting pressure on other currencies.

Global factors and the depreciation of the Ringgit

Today's currency market, especially in the face of major countries' monetary policies, no longer solely reflects the performance of a single country's economy. In the context of globalization, a country's monetary policy decisions have significant effects on other countries. This is also the underlying reason for the recent fluctuations in the Ringgit.

Lim Zhe Qin stated that as the US Federal Reserve is about to announce its monetary policy, global investors are reevaluating their investment portfolios. For Malaysia, a US interest rate hike may lead to capital outflows as investors seek higher returns. This is why we have seen the depreciation of the Ringgit against the US dollar on the eve of the FOMC meeting.

Furthermore, Lim Zhe Qin pointed out that other Asian currencies have also been affected similarly. For example, the Ringgit has also declined by 0.21% against the Singapore Dollar on September 18. This demonstrates the interconnectedness of currency markets, where changes in US monetary policy not only affect the Ringgit but also other currencies.

However, the depreciation of the Ringgit is not solely related to the FOMC. Lim Zhe Qin proposed that from a long-term perspective, the Ringgit has depreciated by 6.59% from 4.40 Ringgit at the end of last year, indicating long-term concerns among investors about the Malaysian economy. This may be related to domestic economic growth, government debt, and other macroeconomic indicators.

To address this situation, the Malaysian government and central bank need to consider how to stabilize the foreign exchange market, prevent excessive capital outflows, and enhance investor confidence in the Malaysian economy.

This series of events once again demonstrates the complexity of the global economic environment, where decisions made by each country have far-reaching effects on other countries. Therefore, when making investment decisions, investors need to consider more external factors, not just the performance of a single country's economy.

Future outlook for the Ringgit

Considering these factors, what is the future trend of the Ringgit? Lim Zhe Qin stated that although there may still be depreciation pressure in the short term, in the long run, if Malaysia can adopt appropriate policies to promote economic diversification and attract foreign direct investment, the outlook for the Ringgit remains optimistic.

In conclusion, understanding the broader context of the global economy and how it affects specific currencies is crucial for investors. For governments around the world, adopting appropriate strategies to protect their economies and currencies in this complex environment is an ongoing challenge.