Ringgit strengthens amid US policy uncertainty

[MALAYSIA] The ringgit strengthened against the US dollar at the start, as quick shifts in US economic plans under President Donald Trump's administration created uncertainty in the business community, potentially depressing demand.

At 8 a.m., the ringgit was trading at 4.4200/4400 against the dollar, up from 4.4300/4340 at the closing yesterday. "The US Dollar Index (DXY) fell 0.2 per cent to 104.335 points despite favourable economic conditions in the US. Heightened policy uncertainties have reduced visibility for the US monetary authority to respond,” Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid told Bernama.

In recent weeks, the ringgit has showed resilience against the backdrop of global economic turmoil. Analysts credit this to Malaysia’s relatively stable domestic economic environment, which has offered a buffer against external shocks. The country's strong export performance, particularly in the electronics and petroleum sectors, has also boosted the ringgit's value.

Mohd Afzanizam stated that maintaining a moderately restrictive monetary policy stance remained the safest way to contain inflation risks..

This approach is consistent with the Malaysian government's broader strategy of ensuring economic stability and sustainable growth. The central bank has been closely monitoring inflationary pressures, particularly in light of growing global commodity prices and supply chain disruptions. By maintaining a balanced monetary policy, Malaysia tries to establish an environment conducive to investment and economic progress.

He noted that Finance Minister II Datuk Seri Amir Hamzah Azizan's declaration of a system to rationalize the RON95 gasoline subsidy via MyKad in the second half of the year is positive for the ringgit.

The rationalization of fuel subsidies is part of a larger fiscal consolidation plan that aims to reduce the budget deficit and improve fiscal sustainability. By linking the subsidy to MyKad, the government hopes to ensure that the benefits reach the most vulnerable segments of the population while reducing waste and inefficiencies. This targeted approach is expected to free up resources for other critical areas such as healthcare, education, and infrastructure development.

"It should be ringgit-positive in the medium and long term as it signals the government’s commitment to fiscal reform. The ringgit is expected to hover around RM4.42 to RM4.43 today, with technical indicators pointing to a neutral zone for the dollar-ringgit pair,” he said.

The ringgit, however, traded mostly lower against major currencies. It edged up against the Japanese yen to 2.9297/9433 from 2.9351/9380 but weakened against the euro to 4.7727/7943 from 4.7720/7763 and slipped against the British pound to 5.7239/7498 from 5.7236/7287.

The local note was mixed against ASEAN currencies. It strengthened against the Thai baht to 13.0615/1318 from 13.0678/0854 and gained against the Singapore dollar to 3.2997/3152 from 3.3060/3094. However, it fell against the Philippine peso to 7.72/7.73 from 7.67/7.68 and slid against the Indonesian rupiah to 266.8/268.1 from 267.4/267.8.