Ringgit Eases Against US Dollar as Investors Await Inflation Data

The Malaysian ringgit has recently experienced a slight decline against the US dollar, trading at 4.0835/4.0880 compared to 4.0820/4.0865 from the previous close, as of 6pm. This movement comes as investors await critical US inflation data, which is expected to impact the Federal Reserve's monetary policy decisions, according to analysts.

TA Securities chief economist Shazma Juliana Abu Bakar said the upcoming US inflation data could influence expectations for the Federal Reserve’s monetary policy direction and, consequently, near-term movements in the ringgit. She also noted that the ringgit is expected to remain relatively resilient throughout this week, supported by positive investor sentiment following Budget 2027 and the government’s continued commitment to fiscal consolidation. However, escalating geopolitical tensions in the Middle East and elevated Brent crude oil prices could heighten external uncertainties and sustain demand for the US dollar as a safe-haven currency.

“The upcoming US inflation data could influence expectations for the Federal Reserve’s monetary policy direction and, consequently, near-term movements in the ringgit.”Shazma Juliana Abu Bakar, chief economist, TA Securities

Despite the recent easing, the ringgit opened higher earlier in the week, buoyed by positive sentiment surrounding Budget 2027 and the government's commitment to fiscal discipline. Bank Muamalat Malaysia Bhd chief economist Afzanizam Abdul Rashid said the government's target to narrow the fiscal deficit to 3.3% of GDP in 2027 from an estimated 3.6% this year reflects a pragmatic approach that could support Malaysia’s sovereign credit rating.

However, as geopolitical risks remain high, particularly following recent missile attacks in Saudi Arabia, the outlook for the ringgit remains clouded. Afzanizam noted that Brent crude oil prices have risen by 1.38% to around $106.16 per barrel, which could further complicate the economic landscape.

“The government’s target to narrow the fiscal deficit to 3.3% of GDP in 2027 reflects a pragmatic approach that could support Malaysia’s sovereign credit rating.”Afzanizam Abdul Rashid, chief economist, Bank Muamalat Malaysia Bhd

At the close, the ringgit also traded lower against other major currencies, including the Japanese yen, British pound, and euro. It fell against the yen to 2.5833/2.5864 and eased against the British pound to 5.4057/5.4177. Against its ASEAN peers, the ringgit decreased against the Indonesian rupiah to 228.1/228.4 but held steady against the Philippine peso at 6.50/6.51.

As investors keep a close eye on the impending US inflation figures, the ringgit's performance will likely continue to reflect both local fiscal policies and external geopolitical developments.