Ringgit edges higher as year-end US dollar softens
The ringgit extended its rally on the last day of 2025, nudging higher against the U.S. dollar as global markets assessed the latest Federal Reserve signals. Local traders in Kuala Lumpur reported modest gains for the Malaysian currency in early trading, with the ringgit trading above the previous session’s levels amid a softer greenback.
The move comes after the Fed’s minutes from its latest policy meeting offered a nuanced view of the central bank’s path in 2026. While policymakers signaled a potential for a slower pace of rate hikes or even pauses, the committee also stressed that the inflation outlook remains a key variable. Investors interpreted the commentary as leaving room for a slower tightening cycle but not an outright pivot away from a cautious stance. This balance kept upside in the ringgit tempered, even as dollar strength cooled in broader markets.
What the FOMC minutes indicate for USD and regional currencies
The FOMC minutes showed policymakers discussing the trajectory of interest rates in the context of persistent inflation pressure and evolving economic data. The document suggested that officials would monitor inflation metrics closely and adjust policy as needed, signaling a possible hold or incremental rate adjustments rather than rapid tightening. Traders responded by scaling back USD bets, which provided support for Asia-Pacific currencies, including the ringgit.
Analysts note that the key driver for the ringgit remains the balance between U.S. monetary policy expectations and regional economic fundamentals. While a constructive global risk-tone can buoy the MYR, persistent concerns about inflation, growth momentum, and capital flows can cap gains. In the Malaysian market, investors also watch domestic indicators such as gross domestic product, export performance, and the monetary policy stance of Bank Negara Malaysia (BNM) for any spillover effects on the currency pair.
Malaysia’s domestic backdrop and market expectations
Back home in Malaysia, traders are weighing the impact of economic data on the currency’s trajectory into 2026. The ringgit’s performance has been influenced by external factors including commodity prices, trade dynamics, and global risk appetite. A firmer external environment typically supports the ringgit, especially when commodity-linked sectors are robust. However, local policy developments and regional political risk can introduce volatility, underscoring the importance of a careful, data-driven approach to positions in the currency market.
Market participants remain mindful of the fact that the ringgit’s gains in the near term may be capped by uncertainties surrounding Fed policy in the first half of next year. If inflation cools more quickly than anticipated, the Fed could accelerate a path to higher rates; if not, the central bank may keep rates steady for longer. This dynamic translates into a narrow range for USD/MYR movement as investors position themselves ahead of upcoming data releases and central bank communications.
What traders should watch next
Going forward, traders will be closely monitoring U.S. inflation indicators, the Fed’s communications, and the timing of any policy shifts. In Malaysia, attention will also focus on domestic economic signals and potential external shocks that could influence the ringgit’s direction. For risk-management-minded investors, maintaining a disciplined approach—combining stop-loss orders, clear risk-reward thresholds, and up-to-date macro data—remains essential in navigating the currency pair through early 2026.
Bottom line
On the last trading day of 2025, the ringgit managed a modest advance against the dollar as the Fed’s minutes suggested a measured stance ahead. While the immediate upside was limited by uncertainty surrounding U.S. policy paths, the currency still benefited from softer dollar pressure and favorable regional sentiment. For traders and investors, the coming weeks will hinge on fresh inflation data, central bank guidance, and the evolving global risk environment.
