The Malaysian Ringgit (MYR) has experienced a fourth consecutive session of weakness, with the USD/MYR exchange rate rising 0.2% to 4.07. This decline is attributed to foreign portfolio outflows from Malaysian equities, as foreign investors have been net sellers of USD120 million in equities since the start of September [1].
Despite this pressure, Commerzbank highlights that the downside for the Ringgit is likely limited due to several supportive factors. July industrial production in Malaysia rose 4.7% year-on-year, which was below the Bloomberg consensus of 5.6% and down from 6.5% in June, marking the weakest growth since March. The slowdown was mainly concentrated in the mining sector, while manufacturing and electricity production remained resilient. Robust AI-related demand for electronic products and strong domestic demand are cited as key drivers supporting the underlying industrial growth momentum [1].
On the monetary policy front, Bank Negara Malaysia (BNM) is expected to maintain a slightly more hawkish stance, focusing on persistent inflation pressures rather than the weaker headline industrial production data. The central bank is likely to look through the mining-led softness, which is attributed to structural declines in mature oil fields, rather than a broad-based economic slowdown [1].
Commerzbank concludes that the overall resilience in manufacturing and domestic demand should keep Malaysia's growth outlook relatively firm, and BNM's hawkish tilt is expected to help cap further MYR losses in the near term [1].
CONCLUSION
While the Malaysian Ringgit has come under pressure from foreign equity outflows and weaker mining output, the currency's downside appears limited by resilient manufacturing, strong domestic demand, and Bank Negara Malaysia's hawkish policy stance. Persistent inflationary pressures are likely to keep BNM focused on tightening, supporting the MYR in the near term.