Ringgit rises against US Dollar amid trade policy uncertainty

[MALAYSIA] The ringgit opened on a stronger footing against the US dollar on Monday, breaching the 4.39-level as ongoing trade negotiations between the United States, Japan, and the European Union added pressure on the greenback. At 8 am, the local note advanced to 4.3955/4195 versus the US dollar, strengthening from last Friday’s close of 4.4100/4175.

Analysts attributed the ringgit’s gains to a combination of external and domestic factors, notably the steadiness in crude oil prices. Brent crude remained around the USD 85 per barrel mark, lending support to Malaysia’s oil-exporting economy. Firmer energy prices typically boost the country’s trade position and investor confidence in emerging markets.

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said uncertainty surrounding US trade policies had dented the dollar’s appeal as a safe-haven asset. “This environment has led to a broad-based appreciation in emerging market currencies, including the ringgit,” he told Bernama.

The US dollar’s recent weakness has been underpinned by mixed global signals, particularly as investors await further cues from the Federal Reserve. Although inflation remains above the Fed’s target, softer-than-expected employment data last week has sparked speculation that further interest rate hikes may be delayed, reducing demand for the greenback.

Dr Afzanizam also pointed out that the US Dollar Index (DXY) continued its downward trend, currently hovering near 98.827 amid persistent trade policy uncertainty.

"President Trump’s recent comments expressing dissatisfaction with the Fed’s rate decisions and their potential impact on the Fed chair’s tenure have only added to market unease," he added.

“In view of the DXY’s decline, the dollar-ringgit pair may trend towards further appreciation today,” he said.

Domestically, the ringgit’s performance has been underpinned by improving macroeconomic indicators. Malaysia’s better-than-expected GDP growth in the second quarter, along with proactive measures by the central bank to stabilize the currency and sustained foreign inflows into the bond market, have reinforced market confidence.

Despite gains against the US dollar, the ringgit traded lower against several major currencies. It slipped against the Japanese yen to 3.1066/1240 from 3.0971/1028 at the previous close, weakened versus the British pound to 5.8539/8859 from 5.8516/8616, and edged down against the euro to 5.0342/0617 from 5.0133/0218.

Against regional peers, the ringgit showed mixed performance. It appreciated against the Indonesian rupiah to 260.4/262.0 from 261.2/261.8 and firmed slightly versus the Philippine peso at 7.74/7.79 from 7.77/7.79. However, the local note eased against the Thai baht to 13.1989/2805 from 13.1815/2154 and fell against the Singapore dollar to 3.3625/3817 from 3.3562/3601.

Market participants remain cautious as ASEAN currencies continue to feel the strain from China’s sluggish economic rebound. The weakening yuan has sparked concerns over competitive devaluation in the region, posing risks to regional currency stability, including the ringgit.