Lloyd Chan at MUFG notes the Malaysian Ringgit outperformed, rising 0.4% versus the US Dollar (USD) after Bank Negara Malaysia (BNM) reintroduced a 2024-style FX support measure to encourage repatriation and conversion of offshore earnings. While USD/MYR has retraced from around 4.15, Chan sees gains as less sustainable than in 2024, given expectations of further Fed tightening and ongoing external pressure.

BNM support meets challenging backdrop

“More broadly, the combination of strong US data and delayed Fed easing continues to underpin the dollar through favourable rate differentials. Most Asian currencies still face relatively lower, and in some cases widening, yield differentials versus the US, limiting scope for sustained appreciation. Capital flow dynamics under a high-for-longer US rate environment could be a key factor shaping Asia FX performance.”

“Against this backdrop, the Malaysian ringgit stands out yesterday, strengthening by 0.4% against the US dollar. This was likely supported by Bank Negara Malaysia’s reintroduction of a 2024-style FX support measure encouraging the repatriation and conversion of offshore earnings by government-linked corporates.”

“USD/MYR has retraced from around 4.15 level, possibly indicating early traction from the policy move. However, the sustainability of gains is likely to be more contained compared to the 2024 episode, given the different macro backdrop.”

“Unlike earlier periods when markets were pricing Fed easing, current conditions are characterized by expectations of further rate tightening, which could continue to exert external pressure on the currency. As such, while policy support should help stabilize the ringgit in the near term, the scope for sharp appreciation appears limited.”

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