How did Hormuz reopening improve risk appetite and limit ringgit falls?

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The reopening of the Strait of Hormuz improved risk appetite, which helped cap the ringgit’s losses

The ringgit opened marginally lower against the US dollar on Friday, but its decline was limited after the reopening of the Strait of Hormuz improved risk appetite. In market terms, easing tensions around a key geopolitical chokepoint tends to support a more constructive trading mood, which can reduce selling pressure on risk-linked currencies like the Malaysian ringgit.
What the market was reacting to at the open
At 8am, the ringgit was quoted at 4.1170/1270 versus the US dollar, compared with 4.1160/1200 at the previous close. The US dollar was supported by stronger-than-expected US economic data, including first-quarter GDP growth of 2.1 per cent versus 1.6 per cent expected, and May PCE inflation of 4.1 per cent in line with expectations. Even with the greenback firmer, the Hormuz reopening helped cushion the ringgit’s drop.
Why improved conditions around Hormuz mattered for trading mood
The Strait of Hormuz is widely treated in financial markets as a major geopolitical shipping route, so reopening after tension typically signals a less risky backdrop for trade and energy flows. When perceived geopolitical risk eases, risk appetite generally improves, meaning investors are more willing to hold assets linked to economic growth rather than avoiding risk.
How risk appetite connects to currency moves
When risk appetite improves, demand for higher-yield or risk-linked assets often rises, which can limit downward pressure on currencies such as the ringgit. The report’s key point was that improved risk appetite from the Hormuz reopening “limited the ringgit’s decline,” even though the US dollar was boosted by US data. In contrast, when risk appetite weakens, investors often shift toward safer assets, which can weigh on currencies like the ringgit.
Oil-price expectations and the broader backdrop mentioned
The commentary also tied the outlook for crude oil to a US-Iran negotiation timeline, noting “lower crude oil prices following the 60-day timeline for peace deal negotiation between the US and Iran.” Lower crude oil prices, alongside improved geopolitical tone, can reduce uncertainty that might otherwise spill into currency sentiment. This broader backdrop aligns with the stated effect: Hormuz reopening improved risk appetite and helped cap ringgit falls.

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How did Hormuz reopening improve risk appetite and limit ringgit falls?

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