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Ringgit outlook worsens on rising Malaysia political risks
MUFG links potential near term ringgit weakness to heightened domestic political uncertainty ahead of the Negeri Sembilan state election on 1 August.
FXStreet, citing MUFG’s Lloyd Chan, said Malaysia’s ringgit remains supported by solid growth, low inflation and prudent policy, but rising domestic political risks could weigh on the currency and lift USD/MYR over the coming months.
The analysis points to a risk premium for the ringgit tied to state election outcomes and coalition dynamics, despite strong external demand and contained inflation.
MUFG also highlighted broader rate and risk factors, noting that high US yields and geopolitical risks in the Middle East are creating near term downward pressure on the ringgit, and that oil supply disruptions could keep global inflation concerns elevated and delay Fed easing.
The note expects authorities to continue smoothing excessive FX volatility through measures that encourage export conversion and repatriation flows by government linked corporates, and it flags the 11 July Johor result and the 1 August Negeri Sembilan election as key political signals for the currency.