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USD/MYR: Malaysian Ringgit to New Low?

Author 
Elliot Laybourne
2 minutes
September 16th, 2022
USD/MYR: Malaysian Ringgit to New Low?

USD/MYR is pushing higher as the US dollar strength forces the Malaysian ringgit to its lowest level since 1998.

Like many currencies, the ringgit is losing considerable ground to the dollar this year. At last count, the Asian currency has depreciated by over 9% year-to-date versus the buck. However, MYR is performing better than some Asian peers. Take the Japanese yen for example, down over 25%, or the Thai baht, down 12%.

The dollar’s strength this year comes as the Federal Reserve Open Market Committee (FOMC) undertakes the fastest rate hike cycle in decades. The Fed has raised rates five times since March, including two back-to-back 75 basis-point increases. Furthermore, the market is pricing a hike of a similar magnitude at next week’s meeting.

Some analysts have called for the Fed to move rates even higher following the higher-than-expected Consumer Price Index (CPI) print earlier this week. The CPI surprised on the upside, coming in at 8.5%, above analysts forecast of 8.1%. Subsequently, terminal rate predictions moved higher to 4.25%, sending bond yields and the US dollar sharply higher. As a result, the US dollar index reached a twenty-year high on Tuesday, although USD has softened in the last two days.

Another factor weighing on the Malaysian ringgit is the drop in crude oil. West Texas Intermediate and the benchmark brent crude contract are down 37% and 35%, respectively, from the 2022 highs. Malaysia is a net exporter of energy products, and as such, the local currency is highly-correlated to the price of oil and gas. With this in mind, traders will be paying close attention to crude oil for clues on the ringgit’s prospects.

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US Dollar to Ringgit Forecast

The monthly price chart shows USD/MYR is trending higher above the long-term moving averages and testing the resistance of the 2016 high of 4.5380. Should the rate post a monthly close above 4.5380, we expect the ringgit to weaken further. In this event, the all-time high of 4.7750 (January 1998) is an achievable longer-term target.

The long-term bullish view is valid as long as USD/MYR is above the 100-month moving average at 4.0839 (green line). Should the ringgit strengthen beyond this level, further gains could see it reach the 3.700 – 3.800 range.

USD/MYR Price Chart

USD/MYR

Contributors

Elliot Laybourne is a seasoned financial professional with a 20-year tenure in investment banking in the City of London. His career includes pivotal senior roles at prominent institutions like ABN Amro, Societe Generale, Marex Financial, and Natixis Bank. Elliot's expertise is particularly notable in commodity derivatives and options market-making. Throughout his career, he has served an impressive roster of clients, including Goldman Sachs, JP Morgan, Credit Suisse, Schroders Asset Management, and the Pennsylvania State Public School Employees Retirement System.