Ringgit edges higher before Fed remarks

The ringgit opened slightly stronger against the US dollar and a basket of majors as markets pivoted into event risk at Jackson Hole. The move was incremental. At 8 am, the currency stood at 4.2200 to 4.2400 versus Thursday’s 4.2235 to 4.2275, with traders marking time for Chair Jerome Powell’s remarks. The set-up is familiar for Asia. When the policy narrative is in play, price action compresses and intraday liquidity falls. That is what a narrow 4.22 to 4.23 guide implies.

The external impulse is clear. The US Dollar Index held firm near 98.619, supported by an upside surprise in the US Flash Composite PMI at 55.4. Services continued to expand, while manufacturing activity showed signs of improvement. That growth mix keeps the policy debate constrained. A resilient services sector argues against an aggressive pivot to easier policy. The manufacturing improvement reduces the urgency to deliver accommodation. Together they harden the floor under the dollar in the absence of explicit dovish guidance.

One line from recent survey evidence complicates the inflation outlook. Respondents flagged higher import tariffs as a driver of input costs and margin pressure. The intended effects are domestic supply chain realignment and a stronger bargaining position for local production. The near-term reality is a stickier cost base that firms will try to pass on to consumers. If that pass-through persists, the Fed’s reaction function tilts toward patience. A patient Fed supports a firmer dollar. A firmer dollar contains ringgit upside until there is clarity on the trajectory of US disinflation.

The ringgit’s cross performance reflects that defensive posture. The local note was modestly higher against the British pound, the yen and the euro at the open. It also firmed versus most ASEAN peers and was steady against the Philippine peso. This is not an idiosyncratic Malaysia story. It is a dollar story with selective regional relief. Where yield cushions are credible and current account positions are steady, Asia FX can grind higher against non-dollar majors even as USD pairs stay range bound.

For policymakers, the risk calculus is straightforward. Bank Negara Malaysia prizes currency stability that is consistent with domestic price formation and financial conditions. When global policy direction is uncertain, the priority is to allow the exchange rate to adjust within a controlled band while preserving two-way liquidity. Today’s narrow range trading is consistent with that approach. Elevated sensitivity to US data and Fed language argues for measured intervention only to smooth disorderly moves, not to defend specific levels.

The Jackson Hole context matters for the ringgit outlook ahead of Jackson Hole because the symposium has a history of recalibrating narratives even without hard decisions. In 2013, extended discussion of balance sheet normalization coincided with a repricing of term premia that hurt emerging market currencies. In 2020, the introduction of average inflation targeting reframed tolerance for inflation overshoots and weakened the dollar for a period. In 2022, a clear insistence on restoring price stability supported the dollar and tightened global financial conditions. Markets remember. Heading into this year’s event, allocators will listen for tonal cues about secondary inflation persistence, the weight assigned to tariffs in the inflation forecast, and the Fed’s tolerance for growth resilience if inflation progress stalls.

Market structure reinforces the range trade for now. Real-money hedging demand often rises into event risk, supporting USD bids on dips. Exporter conversions provide offsetting supply when spot tests the stronger side of the range. Local bond investors remain attentive to global curve signals. If US real yields firm, duration demand in Malaysia may pause, which would limit scope for a sharp ringgit rally. Conversely, a dovish inflection from Powell that narrows US-Malaysia rate differentials could allow the currency to test below 4.22 if regional risk sentiment cooperates.

None of this should be read as a directional call disguised as analysis. The point is that the intersection of tariff-driven cost dynamics and services-led US resilience reduces the probability of an explicit dovish signal from the Fed today. That is why price action across Asia is cautious rather than speculative. It is also why relative gains against non-dollar majors can coexist with a stable or slightly stronger USD pair.

What would shift the calculus meaningfully is a policy tone that emphasizes downside risks to activity over lingering inflation risks. That would weaken the dollar and widen the path for Asia FX appreciation. The alternative is a message that keeps the option value of higher-for-longer policy alive. That would maintain the current regime of contained Asia FX with episodic dollar strength.

What it signals is simple. A marginally firmer ringgit into Jackson Hole is a positioning choice, not a new trend. The policy center of gravity remains in Washington. Until the Fed clarifies the trade-off between growth resilience and tariff-influenced inflation, the ringgit will trade the range, liquidity will be selective, and allocators will stay disciplined on entry points. The posture may look modest. The signaling is cautious.