How do volatile geopolitical rhetoric and supply risks impact the ringgit?

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Volatile Geopolitical Rhetoric and Supply Risks Weigh on Ringgit

Volatile geopolitical rhetoric and supply risks have exerted downward pressure on the Malaysian ringgit, contributing to its weakening trend against the US dollar. These factors, coupled with persistent concerns over global inflation driven by elevated oil prices, have led investors to adopt defensive positions, favouring the US dollar while awaiting greater clarity on regional security.
Geopolitical Tensions Fueling Uncertainty

Ongoing geopolitical tensions, particularly those related to the conflict in Iran which has entered its fifth week, are creating significant uncertainty in the foreign exchange market. Conflicting reports of ceasefire attempts followed by renewed escalations have triggered sharp fluctuations in market sentiment, prompting investors to seek the perceived safety of the US dollar. This heightened risk aversion directly impacts the ringgit by diminishing local market sentiment.
Supply Risks and Inflationary Pressures

The continued holding of Brent crude oil prices above US$100 per barrel is a significant factor exacerbating global inflation concerns. These inflationary pressures, in turn, support the strength of the US dollar. The sustained high cost of oil directly contributes to supply-side risks, impacting various sectors and contributing to a general climate of economic instability that benefits the greenback as a safe-haven asset.
Investor Sentiment and Defensive Positioning

In response to these volatile conditions, investors are maintaining defensive US dollar positions. This strategy is further reinforced by the anticipation of a prolonged pause in US Federal Reserve interest rate adjustments. With interest rates expected to remain unchanged through 2026, the US dollar is seen as having continued support, while emerging market currencies like the ringgit face increased headwinds. Clarity on Iranian guarantees for regional shipping lanes is a key factor investors are awaiting before re-evaluating their positions.

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How do volatile geopolitical rhetoric and supply risks impact the ringgit?

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