Ringgit holds steady amid global market uncertainties

[MALAYSIA] The ringgit opened largely unchanged against the US dollar on Monday, as the greenback regained footing following a four-week decline, with the US Dollar Index (DXY) climbing back above the 100-point threshold. As of 8.04 am, the local currency stood at 4.3700/3900 versus the greenback, slightly firmer than last Friday’s close of 4.3705/3770.

The DXY’s rebound reflects a shift in market sentiment amid conflicting signals from the US Federal Reserve. Policymakers are grappling with robust economic indicators even as inflation remains a concern. Investors are now turning their attention to upcoming US jobs and inflation data, which could steer the Fed’s policy direction and, by extension, influence global foreign exchange movements. A more hawkish Fed stance may strengthen the dollar further, placing pressure on emerging market currencies such as the ringgit.

Analysts noted a cautious tone in the market, attributed to persistent uncertainty over US trade policy. Bank Muamalat Malaysia Bhd Chief Economist Dr Mohd Afzanizam Abdul Rashid said the ringgit is likely to stay within a tight trading band amid ongoing tariff-related ambiguity.

"Additionally, the International Monetary Fund’s cautious outlook on global growth indicates the possibility of further monetary easing by central banks to buffer economic headwinds,” he told Bernama.

The IMF recently downgraded its global growth projections, citing persistent geopolitical risks and uneven recovery patterns across major economies. This has reinforced expectations for looser monetary policy, particularly in Asia, where export-driven economies like Malaysia may benefit from a softer currency. Nonetheless, the ringgit’s trajectory remains influenced by domestic considerations, including Bank Negara Malaysia’s policy moves and structural economic reforms.

Domestically, the ringgit was mostly stronger against a basket of major currencies. It advanced against the Japanese yen to 3.0408/0550 from 3.0431/0481 at Friday’s close and firmed against the British pound to 5.8104/8369 from 5.8128/8214. However, it slipped against the euro to 4.9608/9835 from 4.9596/9670 previously.

The euro’s relative strength reflects the European Central Bank’s commitment to elevated interest rates in its fight against inflation, despite signs of slowing growth in the eurozone. This policy divergence between the ECB and other global central banks, including the Fed, continues to support the euro, posing challenges for cross-currency performance against the ringgit.

In the region, the ringgit was broadly stable against key Asian currencies.

It was marginally lower against the Singapore dollar at 3.3224/3381 compared to 3.3228/3280 last Friday, and held steady against the Thai baht at 13.0195/0900 from 13.0195/0450. The ringgit was also largely unchanged against the Philippine peso at 7.77/7.81 versus 7.77/7.78, and against the Indonesian rupiah at 259.6/260.9 from 259.6/260.2.

Regional currency markets remain subdued as traders await key economic data out of China, Malaysia’s top trading partner. Weaker-than-expected manufacturing or trade figures from China could dampen sentiment toward Asian currencies, while stronger data could lend support to the ringgit and its regional counterparts.