Ringgit rises amid US tariff pause as trade war fears linger

[MALAYSIA] As investors remained cautious following Washington's announcement of a 90-day halt in reciprocal tariffs for all nations except China, the ringgit opened higher against the US dollar today. The local currency increased from 4.4670/4730 at Thursday's closing to 4.4275/4425 against the US dollar at 8.14 am.

The US Treasury’s decision to delay tariffs comes amid ongoing negotiations with key trade partners, including the European Union and Japan, to ease global supply chain disruptions. Analysts suggest this temporary reprieve could provide breathing room for export-driven economies like Malaysia, though the exclusion of China keeps markets on edge. The move also signals a potential shift in US trade policy, prioritizing multilateral discussions over unilateral measures.

Dr. Mohd Afzanizam Abdul Rashid, chief economist of Bank Muamalat Malaysia Bhd, stated that following the 90-day halt, the financial markets have gone into overdrive, with US stocks plummeting sharply, the 10-year US Treasury yield rising, and the US Dollar Index (DXY) sharply declining. With growth and inflation being severely impacted at the same time, it is clear that traders and investors are reevaluating how the tariff would impact the economy.

Market volatility has been further exacerbated by mixed signals from the Federal Reserve, which has hinted at a more cautious approach to interest rate hikes amid global trade tensions. This uncertainty has led to a flight to safety, with investors flocking to gold and other traditional hedges, adding pressure on emerging market currencies like the ringgit.

He told Bernama, "Stagflation appears to be a likely consequence of the trade war, which will make it more difficult for the Federal Reserve to carry out its dual mandate of price stability and maximum employment." According to Mohd Afzanizam, US inflation in March decreased to 2.4% from 2.8% in February, but investors are wary since the reciprocal tariff in April can undo the trend.

Regional central banks, including Bank Negara Malaysia, are closely monitoring the situation, with some economists predicting potential interventions to stabilize their currencies if volatility persists. The ringgit’s performance in the coming weeks will likely hinge on broader risk sentiment, particularly as China’s response to the US tariff exclusion remains a wildcard.

"On that note, the ringgit is expected to remain in a tight range, taking cues from the decline in DXY and heightened market uncertainties over tariffs,” he added. Generally speaking, the ringgit was weaker than other major currencies.

It declined against the euro to 4.9854/0023 from 4.9401/9467, and it lost ground against the Japanese yen to 3.0879/0988 from 3.0594/0639. However, it gained ground against the British pound to 5.7540/7735 from 5.7566/7644 yesterday. In contrast, the local currency was generally stronger than the ASEAN currencies.

It increased against the Philippine peso from 7.79/7.81 to 7.72/7.75, against the Singapore dollar from 3.3361/3411 to 3.3330/3450, and against the Indonesian rupiah from 265.5/265.9 to 263.1/264.1 yesterday. But compared to the Thai baht, the ringgit dropped from 13.0618/0866 to 13.0910/1439.