HomeNewsUSD/MYR: Malaysian Ringgit to New Low?
USD/MYR: Malaysian Ringgit to New Low?

USD/MYR: Malaysian Ringgit to New Low?

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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

Elliot Laybourne
Elliott is a former investment banker with a 20 year career in the city of London. During this time he held senior roles at ABN Amro, Societe Generale, Marex Financial and Natixis bank, specialising in commodity derivatives and options market-making. During this time, Elliott’s client list included Goldman Sachs, JP Morgan, Credit Suisse, Schroders Asset Management, and the Pennsylvania State Public School Employees Retirement System, amongst others. Today, he splits his time between Thailand and Dubai, from where he provides trading consultancy and business development services for family office and brokerage clientele.