Carry Trade Opportunity Opens in Malaysia on Rate-Cut Calls

The market is pricing in a Bank Negara Malaysia interest-rate cut in coming months while economists expect a hold, presenting a potential opportunity for a carry trade.

BNM cut rates by a quarter point last month, its first easing since 2020. A solid economy and better-than-expected US tariff rates may allow it to stop there for now. However, ringgit swaps are pricing a 50% probability of another rate cut in the next six months, offering the opening for the carry trade — borrowing in a low-yielding asset to invest in a higher-yielding one.