Ringgit strengthens on weaker dollar

[MALAYSIA] The Malaysian ringgit opened stronger today against the US dollar, buoyed by improved sentiment toward emerging market currencies. This came after a US appeals court temporarily halted a decision that would have ended most Trump-era import tariffs, which had been weighing on investor outlooks. The ringgit strengthened to 4.2180/2485 against the dollar, compared to Thursday’s close of 4.2390/2475.

Analysts, including Bank Muamalat’s Dr. Mohd Afzanizam, noted that the US Dollar Index fell below the key 100-point level, reflecting a broader softening of the dollar. Weaker-than-expected US jobless data and a slight contraction in US GDP for the first quarter of 2025 added to market expectations that the dollar would remain under pressure. Investors are also eyeing upcoming PCE inflation data, which could further shape currency trends.

Beyond the US dollar, the ringgit gained ground against several major and regional currencies, including the British pound, euro, Singapore dollar, Indonesian rupiah, and Philippine peso. However, it slipped slightly against the Japanese yen and Thai baht. Overall, today’s performance underscores the ringgit’s sensitivity to global macroeconomic shifts and investor sentiment.

Implications

For businesses, especially Malaysian exporters and importers, a stronger ringgit reduces the cost of imports (such as raw materials) but can squeeze export competitiveness. Companies with significant exposure to US or European markets will need to monitor exchange rate shifts closely as they could impact profit margins.

For consumers, a stronger ringgit may ease inflationary pressures by making imported goods, from electronics to food items, more affordable. If the ringgit’s strength persists, it could help stabilize domestic prices, which would be a relief amid broader economic uncertainties.

For public policy, central banks and regulators will likely watch how persistent the US dollar’s weakness is. While short-term currency gains can be positive, excessive strengthening might prompt policymakers to reassess interest rates or liquidity measures to maintain export competitiveness and economic balance.

What We Think

The ringgit’s rally today reflects how quickly global sentiment can swing on legal and economic news from major economies. “Currency markets are living, breathing barometers of confidence,” as one analyst might put it, and today’s movements highlight how interconnected Malaysia’s financial health is with US policy shifts.

While a softer dollar benefits emerging market currencies, it’s not a one-way street: if US inflation data surprises on the upside or the Federal Reserve signals hawkishness, the current trend could reverse. For now, businesses should stay nimble, hedging where possible and preparing for continued volatility.

More broadly, this episode reminds us that tariff policies, legal decisions, and economic data points have ripple effects far beyond their immediate borders. Malaysia’s policymakers and businesses need to stay globally attuned, not just locally focused. A measured, adaptive strategy will be key to navigating these choppy international waters.