KUALA LUMPUR, June 16 ― The ringgit extended yesterday gains to open higher against the US dollar today following the news that the US Federal Reserve's (Fed) decision to increase its benchmark interest rate by 75 basis points, a dealer said.

At 9am, the local currency appreciated against the greenback to 4.3970/3995 from yesterday's close of 4.4120/4150.

Bank Islam chief economist Dr Mohd Afzanizam Abdul Rashid said the Fed increased its interest rate to between 1.50 per cent and 1.75 per cent at its Federal Open Market Committee (FOMC) meeting last night.

"There is more clarity now in Fed's decision as they are going to laser focus on inflation. Based on their latest projection, the Fed Fund Rate is expected to reach 3.50 per cent by end of the year which means another 175 basis points would be announced in the remainder of 2022,” he told Bernama.

In 2023, the Fed Fund Rate could reach between 3.75 per cent and 4.0 per cent, while in 2024 it might go lower to 3.25 per cent to 3.50 per cent, he shared.

Mohd Afzanizam said the pace of interest rate hike would slow down going forward and the Fed might want to pause rate hikes in 2023.

He said this should be a relieve to the market that the Fed is committed to bring its monetary policy stance into a restrictive zone which could lead to moderation in the inflation rate, thereby meeting its dual-policy goal of price stability and maximum employment.

Following the Fed's decision, he said risky assets such as the equity market cheered the decision with key barometer like S&P 500 rebounded 1.46 per cent to close at 3,789.99 points while the two-year and 10-year US Treasury securities yielded higher by 24 and 19 basis points to close at 3.19 per cent and 3.28 per cent, respectively.

ActivTrades trader Dyogenes Rodrigues Dininz said the latest Fed's decision is the biggest one-time hike adopted by the US since 1994.

"Despite the hike, the USD fell against other currencies, partly because this was an expected move and therefore already priced in by the market.

"The upward move of the last few days had already resulted in a 6.01 per cent rise and now a bearish retracement is more likely,” Diniz said.

Meanwhile, the ringgit was traded mostly higher against a basket of major currencies.

The local note rose against the Singapore dollar to 3.1697/1720 from yesterday’s close of 3.1732/1758, strengthened versus the Japanese yen to 3.2750/2773 from 3.2815/2840, and appreciated against the euro to 4.5962/5988 from 4.6277/6309 previously. However, it went down vis-a-vis the British pound to 5.3542/3573 from yesterday’s close of 5.3323/3360. ― Bernama