[MALAYSIA] The Malaysian ringgit opened the week on the back foot, sliding against the US dollar after stronger-than-expected US labor figures gave the greenback fresh momentum. For emerging market currencies, the timing couldn’t be more fraught. As the global economic narrative grows more uncertain heading into the latter half of 2025, volatility is the only constant—and resilience will depend on how well each market navigates a shifting tide of data, sentiment, and geopolitical risk. Investors are now weighing the durability of US economic momentum against growing speculation of future Federal Reserve rate cuts.
Key Takeaways:
- The ringgit opened at 4.2375/2560 against the US dollar, weaker than last Friday’s 4.2270/2360 close.
- US nonfarm payrolls rose by 139,000 in May, above the consensus forecast of 126,000.
- Despite the strong headline figure, the US labor force participation rate fell to 62.4%, and April’s job gains were revised down.
- The US dollar index (DXY) climbed to 99.190 on Friday, lifting the greenback across markets.
- The ringgit posted a modest 0.6% week-on-week gain last week but weakened against most major and ASEAN currencies on Monday.
Comparative Insights
The ringgit’s decline isn’t an isolated case—it echoes a broader pattern playing out across emerging markets whenever the dollar regains strength. This week, the Indonesian rupiah and Philippine peso followed a similar trajectory, slipping in tandem as global capital shifted back toward US assets. Time and again, Southeast Asian currencies have proven highly responsive to Fed rate signals: they tend to rally on whispers of dovish turns, only to retreat when robust US data breathes life into rate-hike bets. It’s a familiar cycle—but no less consequential for the economies caught in its wake.
This episode reflects a familiar pattern: short-term dollar strength after robust US data, followed by rebalancing as deeper labor market cracks emerge. In 2018, for example, emerging currencies came under pressure amid a series of Fed hikes, only to stabilize when global growth fears forced a pivot. A similar setup could unfold in late 2025 if US consumer sentiment deteriorates further.
What’s Next
Investors will be scouring the next batch of US inflation data and Fed commentary for any hints of a policy shift. A cooling in wage growth or signs of softening demand could quickly revive market expectations of rate cuts, offering some relief to pressured regional currencies like the ringgit. In Malaysia, that global backdrop puts added pressure on domestic policymakers, who may be forced to rely more heavily on fiscal buffers and trade diplomacy to steady investor sentiment and dampen volatility.
But in today’s markets, local fundamentals no longer set the tone. Global capital now moves on narratives—and few loom larger than the Fed’s next move. The key question hanging over currency desks: How aggressively will the Fed pivot if the US economy slows, and how soon?
What It Means
While last week’s NFP numbers gave the dollar a temporary boost, they also underscored the precarious balancing act the US labor market is performing. For Malaysia, the ringgit’s weakness isn’t solely a local story—it’s a reflection of global capital sentiment adjusting in real time.
Investors should prepare for short-term currency volatility, particularly as the second half of 2025 unfolds with geopolitical tensions, slowing trade, and fragile consumer sentiment. If the Fed does pivot more decisively toward easing, the ringgit—and its ASEAN peers—may find room to recover. Until then, expect continued currency sensitivity to every data point coming out of Washington.
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