Business

Ringgit edges higher on softer U.S. inflation as rate-cut expectations build

The ringgit opens slightly firmer against the U.S. dollar on Friday, holding near the 4.08 level as weaker-than-expected US inflation data fuelled expectations of a softer US monetary policy stance

Updated 7 months ago · Published on 19 Dec 2025 9:52AM

Ringgit edges higher on softer U.S. inflation as rate-cut expectations build
Perhaps today the ringgit might test a breach of the RM4.08 level, as the case for a lower US federal fund rate in 2026 is building up, Mohd Afzanizam says - December 19, 2025

THE ringgit strengthened modestly against the US dollar at the start of trade on Friday, supported by growing expectations that the United States may move towards a more accommodative monetary policy stance following signs of easing inflation.

At 8am, the local currency rose to 4.0820/0940 against the greenback, compared with 4.0840/0880 at Thursday’s close, keeping it firmly within the 4.08 range.

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said expectations of a U.S. interest rate cut in 2026 had been gaining momentum after inflation data came in below forecasts.

It was reported that US inflation in November eased to 2.7 per cent, undershooting market expectations of 3.1 per cent. Core inflation also moderated to 2.6 per cent, down from 3.0 per cent in September.

“Having said that, October’s data point was not available due to a government shutdown which occurred for 43 days beginning in October, resulting in the inability to compute sequential data points such as month-on-month figures,” he said.

Afzanizam noted that signals from major central banks remained mixed. He said the Bank of England had reduced its policy rate by 25 basis points to 3.75 per cent, marking its fourth rate cut this year as inflation continued to moderate.

In contrast, he said the European Central Bank left its policy rate unchanged after delivering a more optimistic outlook on growth and inflation for the coming year.

“Despite the softer US inflation, the US Dollar Index rose 0.07 per cent to 98.441 points overnight, while the ringgit closed 0.09 per cent higher on Thursday, outperforming most Asian peers.

“Perhaps today the ringgit might test a breach of the RM4.08 level, as the case for a lower US federal fund rate in 2026 is building up,” he added.

At the opening, the ringgit traded mostly weaker against major currencies. It slipped against the British pound to 5.4629/4790 from 5.4513/4567 on Thursday and eased versus the Japanese yen to 2.6234/6313 from 2.6188/6217. However, it edged slightly higher against the euro to 4.7861/8002 from 4.7869/7915.

Performance against regional currencies was mixed. The ringgit weakened against the Singapore dollar to 3.1639/1736 from 3.1620/1653 and fell against the Thai baht to 12.9810/13.0287 from 12.9750/9935. It was largely flat against the Philippine peso at 6.97/6.99 from 6.97/6.98, while inching up against the Indonesian rupiah to 244.1/244.9 from 244.2/244.5 previously.

Market participants are expected to remain cautious as they weigh evolving expectations of US monetary easing against ongoing policy signals from other major central banks. - December 19, 2025

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