The Malaysian ringgit weakened last week even as domestic indicators stayed supportive, with firmer trade prints and contained inflation failing to counter external pressures. USD/MYR moved up towards 4.14 during the week and last closed at 4.1360, as Fed-led hawkish repricing kept US Treasury yields elevated and underpinned the US dollar. The move left the pair’s bullish tone intact on the daily chart, while RSI pushed into overbought territory and the bias stayed tilted higher.
Oil’s pullback is described as providing a buffer rather than a catalyst, offering some relief to the fiscal and subsidy narrative and helping risk sentiment, but not enough to overturn FX direction if dollar momentum remains firm. Near term, the pair is expected to stay better supported unless US yields fall decisively or broader US dollar strength fades, with domestic fundamentals seen as generally intact and the earlier MYR re-rating largely reflected in current pricing.
External Forces Dominate Ringgit’s Weakness
We are seeing the Malaysian Ringgit weaken, with the USD/MYR exchange rate now pushing towards 4.75. This is happening even though Malaysia’s own economic data looks solid. The main reason is the strong US dollar, which is being driven by the Federal Reserve’s firm stance on keeping interest rates high.
External forces are clearly in control of the Ringgit’s value right now. Recent data shows Malaysia’s economy grew a healthy 4.2% in the last quarter and inflation is under control at around 2.0%, but the market is ignoring this. Instead, traders are focused on US 10-year Treasury yields holding firm above 4.3%, which makes holding US dollars more attractive.
The price of oil is providing some help, but it is not enough to reverse the trend. Brent crude has softened to around $85 a barrel from recent highs, which eases some fiscal pressure on Malaysia. However, this is more of a cushion than a real driver for a stronger Ringgit while the dollar is so dominant.
Strategic Positioning Amid US Dollar Strength
Given this outlook, we believe derivative traders should position for a continued rise in the USD/MYR pair. This could involve buying call options on USD/MYR or entering long forward contracts, targeting a move towards the 4.80 level in the coming weeks. The upward momentum appears strong as long as US monetary policy remains tight.
We must also watch for any change in the Federal Reserve’s tone or a sharp drop in US yields. Historically, as seen in late 2022, sentiment on the dollar can shift very quickly, so any sign of a policy pivot could reverse this trend. Until then, the strategy remains to favor the US dollar over the Ringgit.
