Lower July CPI in the US drives dollar weakness, supporting the ringgit’s upward trend
The ringgit strengthened for the third consecutive day on August 13, 2025, hitting a three-day high against the US dollar as weaker-than-expected US inflation bolstered expectations of a Federal Reserve interest rate cut.
US Inflation Sparks Dollar Weakness
The local currency opened at RM4.2115/2285 against the greenback, strengthening from Tuesday’s close of RM4.2290/2320. The US Dollar Index fell 0.43% to 98.097 after July’s headline inflation rate came in at 2.7%, below expectations.
Key Inflation Drivers
Bank Muamalat Malaysia chief economist Dr Mohd Afzanizam Abdul Rashid noted that the moderation in Owner’s Equivalent Rent (OER) to 4.1% from 4.2%—which accounts for about 25% of the Consumer Price Index—was a major factor in the slowdown.
Market Reactions and Rate Cut Outlook
Afzanizam said the USD/MYR is expected to trade between RM4.20 and RM4.23 in the near term, with a high probability of a US rate cut. US benchmark equity indices rose over 1%, while the two-year Treasury yield fell by four basis points to 3.73%, reflecting market optimism.
Mixed Performance Against Majors
At the open, the ringgit slipped slightly against the Japanese yen (2.8502/8619) and the euro (4.9182/9380) but firmed against the British pound to 5.6876/7106.
Gains Across Regional Peers
Regionally, the ringgit strengthened against the Singapore dollar (3.2825/2960), Thai baht (12.9965/13.0570), Indonesian rupiah (258.5/259.6), and Philippine peso (7.38/7.41).
The ringgit’s rise reflects growing market confidence that cooling US inflation will prompt monetary easing by the Federal Reserve, sustaining near-term support for the Malaysian currency.
Sources: Malay Mail (2025) , The Vibes (2025)
Keywords: Ringgit Strengthens, Softer US Inflation, Federal Reserve Rate Cut, USD MYR Exchange Rate, Malaysian Currency, Currency Market Update
