The Malaysian ringgit has proven unexpectedly resilient in the past week, strengthening against the US dollar and most other Asean currencies. As of Friday, the ringgit ended at 4.2285/2345 against the dollar, a decent rebound from last week’s 4.2900/2980. This uncomely march upward illustrates the United States’ larger tale of a dollar in retreat and US fiscal credibility heading down the drain. Consequently, we can look forward to the ringgit recovering over the next week.
During the week, the ringgit was consistently higher against all other Asean currencies, highlighting its resilient strength. In particular, it appreciated against the Singapore dollar to 3.2891/2940 from 3.3041/3105 a week earlier. It appreciated up against the Philippine peso, from 7.71/7.73 to 7.65/7.66. Furthermore, it inched up against the Indonesian rupiah, increasing to 260.7/261.1 from 260.8/261.5.
In reality, the ringgit faced a perfect storm. It was slightly lower against the Japanese yen at 2.9502/9546 from 2.9470/9527 and edged down against the British pound to 5.7072/7153 from 5.7018/7125. It lost against the Thai baht to 12.9744/13.0012 from 12.9003/9318.
Market analysts maintain a bullish outlook for the ringgit against the US dollar from Monday, May 26. This optimism has built up ahead of a few crucial releases, including the US central bank meeting minutes and the personal consumption expenditures inflation report.
Stephen Innes noted the effect that heightened regional climate talks were having on the market.
“These gatherings seldom provide immediate market-moving headlines, but investors will be attentive to nuances – especially anything suggesting tighter ASEAN integration, moves towards de-dollarisation, or alignment with US trade objectives,” – Stephen Innes.
Looking ahead, Innes suggested that announcements of cross-border digital payment infrastructure or logistics hubs would improve foreign direct investment sentiment. Such a move may bring a temporary spike in the ringgit’s value.
“Announcements around cross-border digital payment infrastructure, logistics hubs, or energy transition financing could lift foreign direct investment sentiment and inject short-term bullishness into the ringgit. But without concrete capital commitments, these would be more about narrative,” – Stephen Innes.
In addition to these fundamental factors, Dr Mohd Afzanizam Abdul Rashid pointed to technical factors pointing offshore for continued strength for the ringgit.
“The USD/MYR has breached its immediate support level of RM4.2624, and the next (resistance) level (for the ringgit) is located at RM4.0947. Perhaps the ringgit would continue to strengthen on the back of a weak US dollar outlook,” – Dr Mohd Afzanizam Abdul Rashid.
Leave a Reply