KUALA LUMPUR: The ringgit slipped past the key 4.00 level against the US dollar at midday, trading at 4.0070, down 0.33%, as external headwinds weighed on the local currency.
The weakness reflects a firmer US dollar, as high oil prices fuel inflation concerns and reinforce expectations of a more hawkish Federal Reserve, alongside ongoing geopolitical tensions that have dampened risk appetite.
Donald Trump said the U.S. will pause attacks on Iran’s energy facilities for 10 days as talks progress, although Tehran dismissed Washington’s proposal as “one-sided and unfair.”
Despite the pause, tensions remain elevated with ongoing strikes, disrupted oil flows via the Strait of Hormuz and rising global energy prices, clouding the market outlook.
Kenanga Investment Bank Research said the ringgit is likely to hover near the 4.00 level in the near term, as prolonged conflict risks and expectations of a more hawkish Fed continue to support the US dollar.
It said the ringgit’s earlier outperformance had faded amid a late-cycle correction, with market sentiment shifting towards duration risk as the conflict is seen extending beyond mid-year.
Brent crude holding near US$100 a barrel has added to US inflation concerns, prompting a repricing of Fed expectations, while Malaysia’s BUDI95 fuel rationalisation supports the medium-term fiscal outlook.
However, near-term currency direction will remain driven by the Fed’s response to sustained energy shocks, with elevated oil prices potentially delaying rate cuts and raising the risk of renewed tightening.
Kenanga expects the West Asia conflict to extend into the third quarter of 2026, keeping the Fed restrictive until the fourth quarter.
While higher energy prices may offer some fiscal cushion, prolonged trade disruptions could erode structural advantages, it said.
“Investors are likely to stay overweight on the US dollar as protection against renewed escalation once the current 10-day pause ends, keeping USDMYR broadly anchored near 4.00 in the near term,” it added.
From a technical perspective, USDMYR is overbought, with resistance at 4.02 and immediate support near 3.96.
