Kuala lumpur: The ringgit closed lower against the US dollar as market sentiment weakened amid the United States’ latest reciprocal tariff policy adjustments, ahead of Bank Negara Malaysia’s (BNM) Monetary Policy Committee (MPC) meeting tomorrow. At 6 pm, the local note eased to 4.2365/2445 versus the greenback from Monday’s close of 4.2310/2400.
According to BERNAMA News Agency, Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid noted that the ringgit depreciated to as low as RM4.2470 to the US dollar during the morning session. The 25 percent import tariff imposed by the US has caused traders and investors to act cautiously. However, in the afternoon, the ringgit improved to RM4.2358.
The US has implemented a higher tariff of 25 percent on all Malaysian products entering the country, effective August 1 this year. This is an increase of one percentage point from what was announced in April. MITI stated that Malaysia is committed to ongoing engagement with the US to achieve a balanced, mutually beneficial, and comprehensive trade agreement.
Dr Mohd Afzanizam shared that the focus is on BNM’s MPC meeting, with economists divided on whether the central bank will opt for a 25 basis point cut in the Overnight Policy Rate (OPR). It is anticipated that BNM may reduce the OPR to support domestic demand, keeping the dollar-ringgit exchange rate within a narrow range as caution persists among traders and investors.
Kenanga Investment Bank Bhd maintains its year-end US dollar-ringgit forecast of 4.08, supported by sound domestic fundamentals. Eroding confidence in US fiscal management is driving capital flows towards the European Union and reform-oriented emerging markets. Malaysia, with its macro stability and steady foreign direct investment inflows, stands to gain from this rebalancing. A potential pivot by the US Federal Reserve to interest rate cuts could further boost the ringgit.
The investment bank also addressed potential US tariffs targeting BRICS-aligned economies, suggesting that such actions could accelerate the development of alternative financial systems. It remains uncertain whether BRICS can leverage this to form a more coherent geopolitical front, but their response may influence the future of global economic and financial architecture.
At the close, the ringgit traded lower against a basket of major currencies except for the Japanese yen. The local currency appreciated against the Japanese yen but eased against the British pound and the euro. It also traded lower against ASEAN currencies, including the Thai baht, Singapore dollar, Indonesian rupiah, and Philippine peso.