Ringgit gains as weaker Dollar and trade optimism boost sentiment

[MALAYSIA] The ringgit opened marginally stronger against the US dollar on Monday, buoyed by a softer greenback amid dovish signals from the US Federal Reserve and evolving trade developments involving China, according to analysts.

As of 8 a.m., the local unit traded at 4.2520/2615 against the US dollar, inching up from last Friday’s closing level of 4.2560/2600.

Market observers pointed out that the ringgit’s gains were supported by improving sentiment across regional markets, particularly following encouraging economic data from China. Better-than-expected industrial production and retail sales figures from the world’s second-largest economy helped ease concerns about a broader slowdown in Asia, prompting investors to move toward riskier assets, including emerging market currencies.

Bank Muamalat Malaysia Bhd’s chief economist Dr Mohd Afzanizam Abdul Rashid remarked that the ringgit is likely to remain on a positive trajectory in the near term, given the US dollar’s vulnerability due to ongoing trade uncertainties and potential economic fallout. “The local note appreciated to 4.2568, marking a 1.39 per cent gain last Friday,” he told Bernama.

Malaysia’s strengthening trade position also lent support to the ringgit. The country recorded a trade surplus of RM12.3 billion in March, bolstered by robust exports of electrical and electronics (E&E) goods and firm commodity prices. Analysts suggest continued export momentum may help shield the ringgit from external shocks.

Today’s special parliamentary session will be closely watched by market participants seeking clarity on the government’s response to US-initiated tariff measures. “Key attention will be on potential revisions to the country’s growth outlook and any short-term policy responses from the government,” Dr Afzanizam added.

On the global stage, the US administration has signaled a possible reduction in tariffs on Chinese imports, a move that has been cautiously welcomed by investors. While recent talks between Washington and Beijing have made headway on key issues such as intellectual property rights and technology transfer, a full agreement remains out of reach. The resulting uncertainty has continued to exert downward pressure on the greenback, indirectly supporting emerging market currencies like the ringgit.

Dr Afzanizam also noted that while the US labour market remains relatively robust, with a positive impact on equity prices and bond yields last Friday, the US Dollar Index (DXY) slipped 0.05 per cent to 99.984 points.

“Despite April’s nonfarm payrolls beating expectations, the average monthly job creation has slowed to 133,000 in the first four months of 2025, compared to 176,000 during the same period in 2024,” he said.

Investors are now turning their attention to the upcoming Federal Open Market Committee (FOMC) meeting on May 6-7 for further cues on US interest rate policy. Market pricing still indicates strong expectations of a rate cut in June, with over 100 basis points of easing anticipated by year-end.

At home, attention is also on Bank Negara Malaysia’s monetary policy trajectory. While some economists foresee a possible rate cut in the latter half of 2025 if global risks escalate, stable inflation and steady domestic demand may allow the central bank to maintain the current Overnight Policy Rate (OPR) at 3.00%, providing continued support for the ringgit.

In broader currency markets, the ringgit traded higher against a basket of major and regional currencies. It firmed against the Japanese yen to 2.9389/9459 from 2.9437/9467 at last Friday’s close, gained on the euro at 4.8133/8240 from 4.8297/8342, and strengthened versus the British pound to 5.6424/6550 from 5.6639/6692.

Among ASEAN peers, the ringgit appreciated against the Singapore dollar to 3.2778/2857 from 3.2862/2898 and rose versus the Thai baht to 12.8502/9011 from 12.8697/8903. It also edged higher against the Philippine peso to 7.64/7.67 from 7.65/7.67 and improved slightly against the Indonesian rupiah at 258.6/259.3 from 258.8/259.3.