KUALA LUMPUR (July 27): More rate hikes are expected in the United States for the rest of 2022 amid surging inflation, according to S&P Global Market Intelligence chief economist for Asia-Pacific Rajiv Biswas.
This has helped the US dollar rise against most other currencies, including the Japanese yen and the euro, he told theedgemarkets.com on Wednesday (July 27).
“Due to the sharp rise in US inflation, with the US CPI up 9.1% year-on-year in June, the US Federal Reserve [US Fed] has been hiking policy rates aggressively, with more rate hikes expected during the remainder of 2022.
“Many emerging market currencies, including the [Malaysian] ringgit, have therefore depreciated against the US dollar, as global investors have shifted their asset allocation towards US dollar fixed income assets due to rising US bond yields,” he said.
However, with the US Fed tightening more aggressively because of its much higher inflation rate, rising US fixed income yields are helping to support capital inflows into the US dollar, he explained.
The US Fed is slated to hike its key interest rate by three quarters of a percentage point, as it did in June, in what would be the fourth rate increase in five months, according to news reports.
In June, the US Fed raised the benchmark interest rate by 75 basis points, the largest hike since November 1994.
Earlier this month, Bank Negara Malaysia had decided to increase the country’s overnight policy rate by 25 basis points to 2.25%.