NextFin News - The Malaysian ringgit is poised to enter a period of relative calm, with analysts projecting the currency to hold steady around the 3.95 level against the US dollar as the market navigates a volatile cocktail of Middle Eastern conflict and a hawkish Federal Reserve. Despite the geopolitical tremors emanating from the ongoing war in Iran, the local note has demonstrated surprising resilience, closing the week at 3.9330/9415 on Thursday before the market shuttered for the Aidilfitri holidays. This stability comes at a critical juncture where Malaysia’s status as a net energy exporter is increasingly serving as a structural bulwark against global risk aversion.
The primary anchor for the ringgit’s current valuation is the shifting landscape of U.S. monetary policy. On Wednesday, the Federal Reserve voted to hold interest rates steady in the 3.5% to 3.75% range, a move that disappointed those hoping for immediate relief. U.S. President Trump has been vocal in his criticism of the central bank, recently badgering Fed Chair Jerome Powell to call a special meeting for an emergency rate cut. However, the Fed’s updated "dot plot" suggests only one reduction is likely for the remainder of 2026, as policymakers grapple with a "transitory inflation bump" and the unpredictable economic fallout of the war in Iran.
For Malaysia, the geopolitical crisis is a double-edged sword. While the conflict typically triggers a "flight to safety" that strengthens the US dollar, it has also kept Brent crude prices elevated. According to Kenanga Investment Bank Bhd, this provides a natural hedge for the ringgit. As oil prices retain an embedded risk premium due to the hostilities, Malaysia’s trade balance benefits, offsetting some of the downward pressure exerted by the greenback’s yield advantage. This dynamic was evident in February 2026 data, which showed Malaysia’s trade growing by 9.5% to RM245.2 billion, supported by robust export expansion.
Bank Muamalat Malaysia Bhd chief economist Dr. Mohd Afzanizam Abdul Rashid noted that the ringgit-US dollar pair is likely to trade sideways in the coming week as investors adopt a defensive posture. The market will be thin, with Malaysian exchanges remaining closed on Monday, March 23, for continued Aidilfitri celebrations. This holiday-induced lull, combined with the Fed’s decision to defer any policy pivot until at least the final quarter of the year, suggests that the 3.95 level will act as a firm psychological and technical floor for the currency.
The ringgit’s performance against regional peers further underscores its current strength. While it slipped slightly against the Japanese yen and the British pound this week, it gained ground against the Singapore dollar, the Thai baht, and the Indonesian rupiah. This divergence suggests that while the "Trump trade" and Fed hawkishness are universal pressures, Malaysia’s specific macroeconomic fundamentals—bolstered by energy exports and a steady domestic recovery—are allowing it to outperform its ASEAN neighbors. The narrative for the week ahead is one of watchful waiting, as the world monitors whether the conflict in Iran escalates or if the Fed eventually bows to political pressure for a pivot.
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