Ringgit opens stronger against US dollar on Fed bets

The ringgit opened firmer on Monday as the weaker US nonfarm payrolls print tilted global positioning toward a September Federal Reserve cut. At 8 am, the currency changed hands at 4.2030 per dollar on the bid, compared with 4.2260 at Thursday’s close, with the market re-opening after the Maulidur Rasul holiday. The move is modest in pips, yet notable in signal. It says the rate path in the United States now matters more for Asia’s FX than the recent resilience in US growth narratives. It also says carry and duration are back in the policy conversation, not just residual dollar strength.

The immediate policy catalyst is the softer than expected August NFP, which removed some of the ambiguity the Fed had been leaning on. For Malaysia, that translates into a little more breathing room across the curve and less pressure on imported inflation through the dollar channel. The market has now priced a higher probability that the Federal Open Market Committee will ease next week, and the early session tone reflected that. The ringgit’s initial range is expected to sit around 4.21 to 4.23 against the dollar, with the intraday bias still sensitive to US yields and any last-mile communication from Fed speakers.

There is, however, a second policy variable that traders cannot ignore. Political developments in Japan have turned into a dollar-supportive impulse in the very near term. The resignation of the prime minister and the prospect of more dovish fiscal leaning from the incoming leadership imply that the already heavy public debt dynamics in Japan will keep pressure on local duration. That prospect tends to sustain US-Japan rate differentials, which in turn props up the dollar through the yen channel. In other words, even as the Fed moves toward a cut, a parallel narrative in Tokyo limits the dollar downside and caps how quickly Asian FX can retrace.

The cross-section of early Asia prints supports this two-handed read. The ringgit strengthened to 2.8322 versus the yen from 2.8489 last week, and it gained ground against the pound at 5.6694 from 5.6793, while staying broadly unchanged against the euro near 4.9213. Within ASEAN, the ringgit advanced to 256.5 per 10,000 rupiah from 257.3, firmed to 3.2706 on the Singapore dollar from 3.2775, and improved to 7.35 on the Philippine peso from 7.40. It slipped marginally against the Thai baht to 13.0454 from 13.0666, a reminder that bilateral flows and tourism seasonality can complicate a clean dollar narrative.

From a policy-response perspective, Malaysia does not need to chase the move. Bank Negara Malaysia has maintained a steady, credibility-preserving stance across this cycle. A Fed cut reduces the need for any defensive signaling on the policy rate or liquidity tools. The better use of policy bandwidth will be to keep funding markets orderly and continue nudging term premiums back toward pre-tightening norms. That allows domestic credit to refinance without unnecessary spread penalties and limits pass-through of external volatility into loan pricing.

Regional comparison frames the point. Singapore’s managed float framework naturally offloads some of the adjustment into the nominal effective exchange rate, which is why the Singapore dollar often trades with lower realized volatility than peers. Indonesia’s rupiah continues to rely on a blend of foreign reserve management and selective yield support, while the Philippines leans more on rate signaling to anchor expectations. Malaysia sits between these poles. It does not require aggressive FX intervention to protect credibility, yet it retains operational flexibility to smooth disorderly conditions if they arise.

Market positioning is reacting accordingly. Onshore corporates with dollar payables are taking advantage of the softer print to layer hedges, while real money accounts are reassessing duration at the belly of the curve. The ringgit’s firmer open is consistent with a rotation into local currency assets in anticipation of friendlier external rates, not a wholesale regime shift. The 4.21 to 4.23 intraday guide reflects this balance. A decisive break stronger would likely need either a deeper downside surprise in US labor data revisions or a clear softening in US services inflation. A reversal would require an upside shock in US yields or a more forceful repricing of Japan’s fiscal trajectory than the market currently assumes.

There is also a capital-flow undercurrent to watch. Sovereign and quasi-sovereign issuers in the Gulf and East Asia are timing issuance windows around this softer dollar tone. A modest reopening of external credit could lift cross-border flows into regional debt funds, indirectly supporting the ringgit as hedging flows net out. None of this calls for celebratory rhetoric. It calls for measured monitoring of how much of the Fed’s next step is already priced and how stickily US core services inflation behaves into year end.

What this signals is straightforward. The ringgit opens stronger against the US dollar because the Fed cut narrative regained primacy after the NFP miss. The yen channel keeps the dollar from sliding too far, too fast, which explains the ringgit’s gains against most crosses alongside a slight slip against the baht. For policymakers, the right move is to guard liquidity, not to chase FX. For allocators, the right lens is relative rate differentials and term risk, not headline prints alone. The posture may appear accommodative in price action, yet the underlying signaling remains cautious, as it should at this stage of the cycle.