On a Tuesday morning in Kuala Lumpur, the ringgit opened stronger against the yen, euro and pound while holding nearly still against the US dollar, a small ripple set off by a better-than-expected reading of American factory activity. It is the kind of quiet adjustment that reminds us how distant economies are bound together, with a Malaysian currency answering to decisions made in Washington and the Gulf. Yet the modest gains also reveal something closer to home, as analysts suggest that political uncertainty after the Johor election is holding the currency back from the wider global mood.
Ringgit Edges Higher Against Majors as US Manufacturing Data Beats Forecasts
The flat number hides a tug of war
Mark
The ringgit barely moved against the dollar. Why is this a story?
Mimi
Because the flat number hides a tug of war. A strong US factory reading pulls one way, and falling oil and a rally in tech stocks pull another.
Mark
What was the actual data?
Mimi
The ISM Manufacturing PMI came in at 55.6 for July against a consensus of 54.0. Mohd Afzanizam said it reinforced expectations of a US rate hike.
Luke
Worth noting that the rate hike expectation is his reading of the data, not something the report itself announces.
Mark
Fair. And the political angle?
Mimi
Stephen Innes says uncertainty over whether Pakatan Harapan can recover from the July 11 Johor election is keeping the ringgit from fully joining the global improvement in risk sentiment.
Luke
That's one analyst's view. The article gives no data showing how much of the ringgit's behaviour is political versus anything else.
Mark
And the oil point?
Mimi
Oil was falling on optimism that US-Iran talks would eventually reopen the Strait of Hormuz. Note the word optimism, though.
Luke
Right, nothing has reopened. The RM4.08 to RM4.10 range is also a forecast, not an outcome.
El Pulso
- US factory activity beat forecasts at 55.6, pushing expectations of a further American rate hike and firming the dollar's appeal.
- The ringgit rose against the yen, euro and pound, but stalled near RM4.09 per dollar as the currency failed to follow a global risk rally.
- Domestic political unease after the July 11 Johor state election is weighing on investor confidence in Pakatan Harapan's standing.
- Falling oil prices, driven by hopes of US-Iran talks to reopen the Strait of Hormuz, offer relief, while traders expect the pair to stay within RM4.08 to RM4.10.
On a Tuesday morning in Kuala Lumpur, the ringgit opened stronger against the yen, euro and pound while holding nearly still against the US dollar, a small ripple set off by a better-than-expected reading of American factory activity. It is the kind of quiet adjustment that reminds us how distant economies are bound together, with a Malaysian currency answering to decisions made in Washington and the Gulf. Yet the modest gains also reveal something closer to home, as analysts suggest that political uncertainty after the Johor election is holding the currency back from the wider global mood.
At 8 am in Kuala Lumpur on Tuesday, the ringgit sat at 4.0935 against the US dollar, almost exactly where it had closed the day before. The more noticeable shift came against other major currencies, where the local unit opened higher after a strong report on American manufacturing.
The US Institute for Supply Management's manufacturing index climbed to 55.6 in July, well above the 54.0 economists had expected. Dr Mohd Afzanizam Abdul Rashid of Bank Muamalat Malaysia said the result strengthened the case for a future US rate hike. American firms, he told Bernama, are holding up despite tariffs and costly energy, with technology and artificial intelligence investors leading the optimism while others remain cautious about freight costs and margins.
Falling crude prices, on hopes that US-Iran negotiations might reopen the Strait of Hormuz, and softer US yields have given regional risk assets some support. Stephen Innes of SPI Asset Management nonetheless believes these external gains are being offset at home, where investors are watching whether Pakatan Harapan can recover from its July 11 Johor setback. That uncertainty, he argues, keeps the ringgit from fully sharing in the global improvement, and analysts expect the dollar-ringgit pair to remain within RM4.08 to RM4.10.
At 8 am on Tuesday in Kuala Lumpur, the ringgit was trading at 4.0935 against the US dollar, essentially where it had finished Monday, when it closed at 4.0935/0975. The more visible movement was against other major currencies, where the local unit opened higher after a strong reading on American factory activity.
The data in question was the US Institute for Supply Management's Manufacturing PMI, which rose to 55.6 points in July. Economists had expected 54.0. Dr Mohd Afzanizam Abdul Rashid, chief economist at Bank Muamalat Malaysia Bhd, said the upside surprise reinforced expectations of a US interest rate hike.
He told Bernama that the survey responses pointed to resilient American firms, even as they contend with higher import tariffs and higher energy prices. Companies tied to technology and artificial intelligence investment gave the most positive responses. Others were more mixed: freight costs remain elevated, and firms are concentrating on operational excellence to protect their profit margins.
Mohd Afzanizam added that the US Dollar Index was holding at 99.952 points. Crude oil prices were falling on optimism that negotiations between the United States and Iran would eventually reopen the Strait of Hormuz. On that basis, he expects the dollar-ringgit pair to stay in a narrow band of about RM4.08 to RM4.10 on Tuesday.
Stephen Innes, managing partner at SPI Asset Management, also anticipated a tight range, despite what he called an explosive recovery rally in US technology stocks. He said falling US yields, helped by lower oil prices and softer inflation expectations, should support regional risk assets.
Innes argued, however, that those favourable external signals are being offset at home. Market attention is increasingly on whether Pakatan Harapan can rebound from the July 11 Johor state election and fend off the broader political challenge. In his view, that uncertainty is stopping the ringgit from fully sharing in the improvement in global risk sentiment.
Against the majors, the opening moves were modest but all in one direction. The ringgit rose to 2.5982/6027 per yen from 2.6062/6089, to 4.7104/7179 per euro from 4.7165/7211, and to 5.4963/5051 per British pound from 5.5053/5107.
Among regional currencies the picture was mixed. The ringgit firmed against the Singapore dollar at 3.1908/1961 (from 3.1911/1944) and the Thai baht at 12.2468/2718 (from 12.2663/2827). It eased against the Indonesian rupiah at 227.4/227.9 (from 227.4/227.7) and was unchanged against the Philippine peso at 6.72/6.73.
The analysts' shared expectation is a day inside the RM4.08 to RM4.10 band, with attention on how Pakatan Harapan's standing develops after the Johor election.
Citas Notables
Firms in the US have been quite resilient despite higher import tariffs and higher energy prices.— Dr Mohd Afzanizam Abdul Rashid, Bank Muamalat Malaysia Bhd
Domestic political uncertainty is preventing the ringgit from fully participating in the improvement in global risk sentiment.— Stephen Innes, SPI Asset Management
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Economy & Finance