KUALA LUMPUR: The ringgit held its ground after Bank Negara Malaysia’s (BNM) 25-basis-point cut in the overnight policy rate (OPR).

Economists do not expect the rate cut to 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.

“The 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 The Edge Financial Daily.

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, BNM announced the OPR reduction 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’s decision.

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

“The 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.”

AmBank Group chief economist and head of research Dr Anthony Dass said should global uncertainties continue to ease, it should see the yuan trending on a systematically stronger note with the US dollar softening.

“Pending no major surprises from both domestic and external [factors] the ringgit will track closely with yuan and should also be trending on a firmer note,” he told The Edge Financial Daily.