Ringgit Climbs to Near Six-Year Peak on Weaker US Inflation Outlook

KUALA LUMPUR: The Malaysian ringgit strengthened to its highest level in nearly six years against the US dollar on Friday, closing at the 4.07 level after softer-than-expected US inflation data boosted sentiment toward emerging market currencies.

At 6:00 pm, the ringgit appreciated to 4.0740/0785 versus the greenback, improving from Thursday’s close of 4.0840/0880. The last time the local currency traded at this level was on Jan 15, 2020.

According to Bank Muamalat Malaysia Bhd chief economist Dr. Mohd Afzanizam Abdul Rashid, the latest US consumer price index (CPI) data suggests growing expectations that the US Federal Reserve may consider further interest rate cuts in 2026.

“If the Fed moves in that direction, the interest rate differential between the Fed Funds Rate and Malaysia’s overnight policy rate would narrow, which is supportive of the ringgit,” he said.

US inflation for November came in at 2.7 percent, below market expectations of 3.1 percent. Core inflation also eased to 2.6 percent, down from 3.0 percent in September, reinforcing expectations of a more accommodative US monetary policy stance.

Meanwhile, Dr. Afzanizam noted that the Bank of Japan raised its policy rate by 25 basis points to 0.75 percent, the highest level in three decades. Despite the move, the Japanese yen continued to weaken against the US dollar.

At the close of trading, the ringgit performed mostly higher against major global currencies. It strengthened against the euro to 4.7715/7767 and appreciated against the Japanese yen to 2.5909/5940, although it slipped marginally against the British pound.

The local currency also gained ground against regional peers, rising versus the Singapore dollar, Thai baht, Philippine peso, and Indonesian rupiah, reflecting broad-based demand for the ringgit amid improving global sentiment.

Market analysts expect the ringgit to remain supported in the near term, provided US inflation continues to moderate and global central banks shift toward more accommodative monetary policies.