Ringgit opens near flat vs USD at 4.0935 after strong US ISM PMI of 55.6

For currency traders and macro investors, the ringgit's tight range reflects a tug-of-war between resilient US economic data and easing geopolitical risk. While strong PMI numbers boost the dollar, falling crude and domestic political jitters keep the ringgit hemmed in, creating a tactical trading environment around RM4.08–4.10.

The Malaysian ringgit opened Tuesday's session nearly unchanged against the US dollar while posting gains against other major currencies, following the release of stronger-than-expected US manufacturing data. At 8 am local time, the USD/MYR pair stood at 4.0935/4.1000, virtually flat from Monday's close of 4.0935/4.0975. This tepid movement masks significant underlying cross-currents: a US ISM Manufacturing PMI that surprised to the upside at 55.6 in July (consensus 54.0), reinforcing bets on further Federal Reserve tightening, and a simultaneous decline in crude oil prices amid renewed US-Iran diplomatic optimism.

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The Malaysian ringgit opened Tuesday's session nearly unchanged against the US dollar while posting gains against other major currencies, following the release of stronger-than-expected US manufacturing data.

The ISM data is pivotal. The index surged to a 14-month high, signaling resilient factory activity despite headwinds from elevated tariffs and energy costs. Firms tied to technology and artificial intelligence investment reported the most bullish sentiment, a reflection of ongoing AI capex cycles. However, Bank Muamalat Malaysia chief economist Dr. Mohd Afzanizam Abdul Rashid cautioned that responses were mixed, with elevated freight costs squeezing margins and forcing a renewed emphasis on operational efficiency. The data unequivocally strengthens the case for the Federal Reserve to maintain its hawkish posture, a move that typically buoys the dollar and pressures emerging-market currencies like the ringgit.

Yet the ringgit's stability against the greenback is notable. Afzanizam attributed this to the US Dollar Index (DXY) holding steady at 99.952 points, as downward pressure from falling crude prices offset dollar strength from the PMI. Brent crude slipped as markets priced in a potential easing of geopolitical risk following signs of progress in US-Iran negotiations that could reopen the Strait of Hormuz. Lower oil is a double-edged sword for Malaysia: as a net oil exporter, it typically weakens the ringgit due to reduced export revenue, but it also alleviates global inflation fears, reducing the urgency for aggressive rate hikes that would strengthen the dollar. The net effect is a fragile equilibrium around the RM4.09 level.

SPI Asset Management managing partner Stephen Innes highlighted additional cross-currents. He noted that the explosive recovery rally in US technology stocks and declining US yields—supported by softer inflation expectations—should be constructive for regional risk assets, including the ringgit. However, these tailwinds are being neutralized by domestic political uncertainty. The Johor state election on July 11 has left market participants questioning whether the ruling Pakatan Harapan coalition can withstand a broader political challenge, adding an idiosyncratic risk premium to Malaysian assets.