This Week at a Glance…

i) Ringgit improves on the back of the weakening US dollar.

The local note is up 2.60% from its 25-year low in October, but will this rally continue through the end of the year?

ii) US Federal Reserve holds interest rates steady, markets rally in response.

The committee decided to pause rate hikes for the third consecutive time and said that they may look to reduce rates next year. The S&P, Dow Jones, and Nasdaq jumped 2.0% since Tuesday.

iii) Tax relief deadline, receipts, and more.

There is less than one month to maximize your tax relief for YA2023. What are the most common things that you can claim?

Scroll down to read the details.

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Ringgit Rebounds as the US Dollar Falls

It has been a turbulent week for the local note.

After falling to RM4.7071 on Wednesday, the ringgit reversed course and strengthened to RM4.6562 before closing the week at RM4.6678.

From its 25-year low of RM4.7926 in October, it is now up 2.60%.

Analysts expect this upward trend to continue over the next few weeks, propped up by China’s promise to boost its domestic economy and the US Federal Reserve holding interest rates steady.

Meanwhile, the dollar index, a measure of the greenback versus six major currencies, slid 1.56% since Wednesday.

In the past two months, the dollar fell 4.71%, reflecting a similar weakness in the USDMYR pair.

US Fed keep interest rates unchanged, hints at rate cuts in 2024.

On Wednesday, the Federal Reserve kept interest rates unchanged at 5.25-5.50%, adhering to market expectations.

It is the third consecutive pause since the previous hike in July, leading analysts to believe that the Fed is done on rate increases.

During the meeting, Chairman J. Powell had a more optimistic tone as he said that inflation has fallen faster than expected and that the committee is opening up discussions to cut borrowing costs next year.

Highlights of the 13 Dec FOMC meeting:

• Interest rates were kept at 5.25-5.50% (third consecutive pause).

• Fed Chairman J. Powell said further rate hikes are ‘not likely’.

• The Fed is looking to reduce interest rates next year.

• A recession is not needed for the Fed to cut interest rates.

• FOMC members projected the Fed Funds Rate to be slashed to 4.6% by end-2024 with 3 rate cuts, or 75 bps reduction.

• Markets are pricing in 150 bps of cuts in 2024, which would bring the Fed funds rate to 3.75-4.0%.

Click on this link for more highlights.

US market rallies from the Fed’s pause, global markets follow

Since the Fed meeting, the S&P surged over 2% to 4,718 points.

It is now only 2% away from its all-time high of 4,816 points in January 2022.

Notable tech stocks such as Apple (AAPL) and Nvida (NVIDIA) have either surpassed their all-time highs or are looking to break through them.

Back at home, the FBMKLCI jumped 1%, led by major bank stocks CIMB and Public Bank, which have rallied 1.40% since Wednesday.

Will this rally continue through 2024?

With the Federal Reserve pretty much done hiking interest rates and looking to reduce them next year, financial experts expect the positive momentum to continue in 2024.

Economist Sani Hamid said that the current market is still heavily allocated in cash and bonds, so we may see reallocation into riskier assets.

You have less than 2 weeks to maximize your tax reliefs!

If you’re looking to get the most value out of your tax breaks, it’s important to note that the tax relief for YA2023 is for this year only, even though the submission is in May 2024.

This means that you have less than two weeks to maximize your remaining tax reliefs.

Notable ones include:

• Voluntary contribution to EPF: RM3,000 (on top of the initial RM4,000)

• PRS: RM3,000

• Medical (health checkups): RM1,000

• Lifestyle (books, personal computers, tablets, sports equipment): RM2,500

There are also quite a few confusions regarding tax reliefs on lifestyle.

The RM2,500 rebate includes spending for your spouse and/or children as well.

"Pembelian bahan bacaan" covers all types of reading material, whether physical or digital.

Any reading material, as long as it’s not banned or offensive, can be included in this relief.

Do I need to submit receipts when filing for taxes?

No, you don’t need to submit your receipts when filing for taxes.

But you must keep them as proof.

According to LHDN, individuals claiming tax relief should store their receipts for up to SEVEN years.

If you get audited by the authorities, failure to provide evidence will result in a 25-45% penalty.

The inks on receipts fade fast, and low-quality papers disintegrate easily.

So make sure you take a snapshot of your receipts and store them in softcopy as well.

If you’re unsure how taxes work, check out our previous newsletter here.

That’s all for this week’s newsletter!

DISCLAIMER: The information contained in this newsletter is for informational and educational purposes only. Nothing herein shall be construed to be financial, legal, or tax advice.