Geopolitical Risk, Not Oil, Is Now the Ringgit’s Anchor

The ringgit strengthened to 3.98 against the US dollar this week, but gains are stalling — not because of domestic weakness, but because global risk sentiment is still tethered to Middle East volatility. Lower oil prices should be helping the ringgit: Brent crude retreated, easing input costs and improving Malaysia’s trade balance. When oil falls, import bills shrink and inflation pressure cools — a classic tailwind for emerging market currencies. Yet the ringgit isn’t capitalizing. Renewed Israeli strikes in Lebanon have shattered confidence in a durable ceasefire, keeping oil prices elevated on geopolitical risk alone. That risk premium is now the dominant force, outweighing any fundamental relief from lower production costs. Investors aren’t buying the rally. They see the reprieve as temporary. At the same time, the US dollar is firming on strong domestic data — a 4.3% unemployment rate and solid payroll growth — reinforcing the Federal Reserve’s higher-for-longer rate stance. That makes dollar assets more attractive, pulling capital from currencies like the ringgit. Defensive positioning ahead of diplomatic talks in Islamabad only deepens the caution. Kenanga expects the currency to trade between 4.00 and 4.05 in the near term. Technicals show resistance at 4.01 and support at 3.96, but range-bound action is likely until there’s concrete progress on de-escalation. Until then, markets won’t take aggressive long positions. Sustained volatility in Strait of Hormuz-linked energy prices remains a direct threat to Malaysia’s inflation and fiscal outlook — a reminder that for small, open economies, the fate of the currency often hinges not on what happens at home, but on what happens far beyond its shores.