USD/MYR: Here’s why the Malaysian ringgit is in a freefall

on Apr 15, 2024
  • The Malaysian ringgit has been in a strong freefall in the past few weeks.
  • The USD/MYR is nearing its highest point in February as the rally continues.
  • The rally is happening as the central bank works to prevent its slowdown.

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The Malaysian currency is under intense pressure as it nears its all-time low against the US dollar. The USD/MYR pair was trading at 4.77 on Monday morning, a few points below its February high of 4.80. 

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Malaysian ringgit is plunging

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It has surged by more than 12% from its lowest point in 2023 and by almost 20% from its 2020 lows. Most notably, the pair has risen for three consecutive weeks. 

Ithe Malaysian ringgit is not the only emerging market currency that is in a freefall. In Africa, the Nigerian naira has plunged by over 50% in the past few months. Similarly, the Philippine peso has retreated to its lowest level since November 2023 while the Chinese yuan stands at 7.24 against the US dollar.

The USD/MYR pair has jumped sharply because of the general strength of the US dollar. Data shows that the US dollar index (DXY) has jumped to $106, its highest level since November 3rd. It is up by over 5.3% from its lowest level in 2024.

The greenback’s rally is mostly because the Federal Reserve is expected to maintain a hawkish tone now that US inflation has remained stubbornly high. Recent data showed that the country’s inflation jumped to 3.5% in March while the core CPI rose to 3.8%.

Therefore, the futures market point to either a 0.25% rate hike this year or a continued pause at the 23-year high. 

In line with this, the USD/MYR has rallied because of the ongoing geopolitical tensions, which will likely stir inflation. The price of crude oil has jumped to $91 while the West Texas Intermediate (WTI) has moved to $86. 

Meanwhile, the pair has continued rising as traders defied the actions of the central bank and the government to support the currency. In February, the government pressured state companies to repatriate foreign funds in a bid to lift the currency. 

In a statement on Monday, the central bank that it will continue coordinating the forex market to boost the currency. The statement said that it would ensure the orderly functioning of the market using companies, exporters, and other state-owned firms. 

USD/MYR technical analysis

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USD/MYR chart by TradingView

The USD to MYR exchange rate has been in a strong bull run in the past few weeks. It has crossed the 25-day and 50-day Exponential Moving Averages (EMA). The pair is also nearing the crucial resistance point at 4.80, its highest swing in February.

Meanwhile, the MACD and the Relative Strength Index (RSI) have continued soaring, signaling that it has a bullish momentum. Therefore, the path of the least resistance for the pair is bullish, with the next point to watch being the psychological point at 15.

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