Ringgit rises as US dollar weakens to three-year low

[MALAYSIA] The ringgit extended its gains to begin higher versus the US dollar on Monday, as the greenback fell to a new three-year low amid rising US-China trade concerns. At 8 a.m., the local currency increased 1.06 percent to 4.4185/4270 against the US dollar, up from 4.4200/4265 at the closing of Friday.

The dollar's decline follows growing investor concerns over the US Federal Reserve's potential pause in its aggressive rate-hike cycle, as recent economic indicators point to softening inflation and slower growth. Market participants are now pricing in a higher likelihood of rate cuts by year-end, further dampening demand for the greenback.

Dr Mohd Afzanizam Abdul Rashid, chief economist of Bank Muamalat Malaysia Bhd, said the US Dollar Index (DXY) has dipped below 100 points, which he termed as perplexing given the increased risk aversion due to trade and tariff worries.

He observed that, despite US President Donald Trump's announcement over the weekend that tariffs on cellphones and computers will be lifted, market sentiment remained shaky.

Analysts also attribute the ringgit's resilience to improving domestic economic fundamentals, including stronger-than-expected export figures and stabilizing commodity prices. Malaysia's trade surplus widened to RM19.6 billion in March, supported by robust shipments of electrical and petroleum products, providing additional support for the local currency.

"US data, particularly the University of Michigan Consumer Sentiment Index, fell to 50.8 points in April, indicating that consumers may remain cautious in their spending. On that note, we sense that the dollar-ringgit is likely to stay within a narrow range, though with a slight positive bias, as the DXY has declined quite significantly," the economist told Bernama.

Regional currencies also benefited from the dollar's broad weakness, with the Thai baht and Indonesian rupiah posting modest gains. However, lingering geopolitical risks, including renewed US-China tensions over Taiwan and technology restrictions, could introduce fresh volatility in the coming sessions.

The ringgit also advanced versus several major currencies. It strengthened versus the Japanese yen to 3.0761/0822 from 3.0952/1000, increased against the euro to 5.0123/0220 from 5.0207/0281, and nudged up against the British pound to 5.7820/7932 from 5.7849/7934.

Meanwhile, the native currency was blended with ASEAN currencies. It was somewhat higher against the Singapore dollar at 3.3491/3566 compared to 3.3495/3549, but fell against the Thai baht to 13.1778/2141 versus 13.1599/1902.

The local currency was barely altered against the Indonesian rupiah, at 263.0/263.7 compared to 263.1/263.6 yesterday, while it remained stable versus the Philippine peso at 7.75/7.77.

Looking ahead, traders will closely monitor Malaysia's upcoming inflation data and Bank Negara Malaysia's policy stance for further cues on the ringgit's trajectory. With global central banks adopting divergent monetary policies, currency markets are expected to remain sensitive to shifting risk appetites in the near term.