The ringgit is expected to remain under pressure against the US dollar in the near term as resilient US economic data, heightened geopolitical tensions in the Middle East and renewed tariff concerns continue to support demand for the greenback, according to Kenanga Investment Bank.
The research house noted that the Malaysian currency weakened beyond the RM4.00-per-US dollar level recently, reflecting a broader shift toward defensive positioning by investors amid rising global uncertainties.
Kenanga said limited progress in negotiations between the United States and Iran, coupled with renewed concerns over US trade tariffs, had increased risk aversion across financial markets.
As a result, investors have increased exposure to the US dollar, supported by stronger-than-expected US economic data and growing expectations that the US Federal Reserve may need to maintain a tighter monetary policy stance for longer.
The research house added that ongoing disruptions to shipping and energy flows through the Strait of Hormuz have kept oil prices elevated, fuelling inflation concerns globally and pushing US Treasury yields higher.
“The ringgit weakened as investors increased USD exposure amid resilient US data and rising Fed hike expectations,” Kenanga said.
Market sentiment has also been influenced by the unwinding of previous expectations for aggressive US rate cuts, while investors continue to maintain cautious allocations toward emerging market assets.
Looking ahead, attention will turn to upcoming US economic releases, particularly non-farm payrolls data and inflation figures due next week, which could provide further clues on the Federal Reserve’s policy direction.
Kenanga said stronger labour market conditions and persistently elevated inflation readings would likely reinforce expectations for higher US interest rates, supporting the dollar and keeping Treasury yields elevated.
Investors are also expected to closely monitor developments in US-Iran negotiations, particularly any signs of progress that could help restore normal energy flows through the Strait of Hormuz and ease pressure on oil markets.
The research house noted that domestic political developments, including those in Johor, are likely to remain a secondary consideration for currency markets unless they trigger broader concerns over Malaysia’s political outlook.
For now, Kenanga’s base-case scenario assumes negotiations between Washington and Tehran remain fragile and disruptions in the Strait of Hormuz persist.
Under this scenario, elevated oil prices are expected to keep inflation risks high and sustain expectations for tighter US monetary policy, encouraging investors to remain cautious.
“We expect USD/MYR to trade within the 4.00 to 4.05 range, with risks skewed toward further ringgit weakness,” the research house said.
From a technical perspective, Kenanga noted that the USD/MYR pair is approaching overbought territory, with immediate resistance seen at 4.04 and support at 3.98.
