Ringgit Opens Higher as Fed Minutes Signal Slower Rate Hikes
The ringgit edged higher on the last trading day of 2025, edging up against the US dollar as markets digested the latest signals from the Federal Reserve. Minutes from the Federal Open Market Committee (FOMC) released overnight suggested a more cautious stance on future rate hikes, tempering the dollar’s advance and providing some relief for emerging market currencies, including Malaysia’s ringgit.
At the opening bell in Kuala Lumpur, the ringgit traded in a narrow range, with analysts noting that the currency was lifting as the greenback softened following the Fed communications. Traders described a mix of relief and caution, as the market priced in expectations of a less aggressive path for policy tightening in 2026, even as potential economic headwinds remain a focal point for risk sentiment going into the new year.
What the Fed Minutes Indicated
The FOMC minutes highlighted several key themes: policymakers may adopt a data-dependent approach moving forward, and the pace of future rate hikes could slow if inflation continues to cool as anticipated. While some members cautioned against prematurely declaring victory over inflation, there was a broad consensus that the central bank would adjust policy gradually to avoid destabilizing financial conditions.
For currency traders, the takeaway was that a slower trajectory for rate increases reduces the yield advantage currently enjoyed by USD-denominated assets. This dynamic often translates into a softer dollar and a supportive backdrop for regional currencies, including the ringgit, which has struggled at times with capital outflows driven by global monetary policy shifts.
Malaysia’s Domestic Factors and Market Outlook
Beyond the Fed, Malaysia’s domestic backdrop remains a critical driver for the ringgit. Persistent inflation pressures, commodity price movements, and the pace of economic recovery influence local sentiment. Analysts note that a resilient, albeit cautious, domestic growth trajectory helps the ringgit to hold its gains when external tailwinds align with domestic stability.
Investors are eyeing upcoming data releases such as Malaysian trade figures, inflation, and the central bank’s forward guidance. The Bank Negara Malaysia (BNM) stance will likely be scrutinized for any indications of policy normalization or adjustments to the overnight policy rate (OPR). Market participants expect a careful balancing act between fostering growth and anchoring inflation expectations as the year closes and a new one begins.
Outlook: Upside Limited Despite a Positive Start
Despite the modest uptick, the upside for the ringgit is viewed as capped in the near term. Several factors contribute to a cautious outlook: ongoing global policy uncertainties, potential risk-off episodes stemming from geopolitical tensions, and the possibility that the US dollar regains momentum if inflation data surprises to the upside. In this environment, the ringgit could continue to move in a tight range, seeking direction from both international policy cues and domestic data surprises.
For traders, risk management will be essential as 2026 approaches. Liquidity conditions in the Singapore-Malaysia corridor remain sensitive to global yields and risk appetite. Short-term traders might look for brief spikes in the ringgit against the USD around key data releases, while longer-term investors could focus on Malaysia’s growth trajectory and external demand for its exports, which will ultimately shape the currency’s longer-run path.
Conclusion
The ringgit’s opening higher on the last trading day of 2025 reflects a delicate balance between improved risk sentiment from the Fed minutes and the persistent fragility of global markets. As investors brace for the new year, the currency will likely continue to respond to a mix of U.S. policy signals, regional demand, and domestic economic indicators, with upside limited in the near term but potential for selective moves driven by data surprises and policy guidance.
