Ringgit Decline Amid Middle East Tension, To Remain Rangebound
The local currency experienced a weakening trend this week, slipping past the 4.26 per US Dollar (USD) mark on Thursday. This decline was primarily driven by escalating tensions in the Middle East and growing speculation regarding potential US involvement in the conflict, dominating market sentiment.
While the Ringgit held steady early in the week, the surge in geopolitical risk saw Brent crude oil prices climb to USD78.9 per barrel. Typically, higher oil prices tend to bolster the greenback. However, according to market analysts, persistent concerns over the US's fiscal health have tempered the USD's gains, preventing a stronger appreciation.
This week, the US Dollar's performance was notably more responsive to geopolitical headlines than to macroeconomic indicators. Weaker-than-expected US retail sales figures, the Federal Reserve's increasingly 'stagflationary' guidance, and foreign selling of US Treasuries had limited impact on the greenback's movement, as investors prioritized safe-haven assets amidst global uncertainty.
With a light data calendar expected, geopolitical developments are set to remain the central focus for currency markets. The USD is anticipated to outperform the Euro (EUR) in this risk-off environment. Remarks by President Donald Trump, suggesting a decision on US military participation could come within two weeks, further amplified market unease. While elevated oil prices have temporarily boosted the USD's safe-haven appeal, long-term structural fiscal concerns, particularly rising US debt, may exert downward pressure on the currency over the longer term.
Analysts at Kenanga Research expect rising geopolitical tensions and ongoing tariff uncertainty to continue providing support for the USD, which will likely exert pressure on emerging market (EM) currencies, including the Ringgit. The Ringgit is projected to trade within the 4.24 – 4.27 per USD range, with its trajectory heavily dependent on the evolving situation in the Middle East. Markets will also closely monitor the Federal Reserve's June 25 board meeting, where discussions on potential easing of bank leverage rules could have broader capital implications.
Technically, the USDMYR pair remains rangebound, orbiting its 5-day Exponential Moving Average (EMA) at 4.25. Price movement is expected to continue being primarily driven by geopolitical developments, with immediate support identified at 4.24 (S1) and resistance at 4.26 (R1). Related
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