KUALA LUMPUR (Jan 23): The ringgit has held its ground after the central bank's 25-basis-point cut in the overnight policy rate. Economists do not expect the rate cut will weaken the local currency.

At the time of writing, the ringgit depreciated 0.08% to 4.0688 against the greenback. The local currency has gained 0.53% since the start of the new year.

"Ringgit has remained fairly stable despite the surprise rate cut [and looking ahead] we do not expect further rate cuts," United Overseas Bank Malaysia Bhd's Global Economics and Market Research senior economist Julia Goh told theedgemarkets.com.

In the short term, the bank is forecasting the ringgit to range between 4.05 and 4.08 against the US dollar, she said.

Yesterday, Bank Negara Malaysia (BNM) announced a 25-basis-point cut in the overnight policy rate to 2.75%, which is seen as "timely" in view of the increasing global headwinds, and marking its lowest point since March 2011.

BNM's Monetary Policy Committee said it was acting pre-emptively to secure the country's improving growth trajectory amid price stability and to counter downside risks arising both domestically and abroad.

FXTM market analyst Han Tan said the ringgit was able to shrug off the interest rate cut as it strengthened against the US dollar on the day of the surprise BNM decision.

Looking ahead, external factors will remain as the primary drivers over the ringgit's performance, including market risk sentiment, US dollar and Chinese yuan performance, as well as the global economic trajectory, Tan said.

"Ringgit is still expected to strengthen alongside most regional currencies over the course of the year, as Asian economies stage a recovery on the back of improving global economic conditions.

"The near-term support level for USD-MYR can be seen around the 4.05 region, with stronger support set to arrive at the 4.00 psychological level," he said.

AmBank Group chief economist and head of research Dr Anthony Dass concurred that the ringgit is likely to cue from the Chinese yuan performance. He commented that should global uncertainties continue to ease, it should see Chinese currency trending on a systematically stronger note with the US dollar softening.

"Pending no major surprises from both domestic and external, the ringgit will track closely with yuan and should also be trending on a firmer note," Dass told theedgemarkets.com.