Ringgit Flat Near RM4.09 After US Factory Data Surprise

The ringgit opened almost unchanged against the US dollar on Tuesday, holding near RM4.09 after stronger-than-expected American factory data reinforced expectations that the US Federal Reserve will raise interest rates.

At 8am, the local currency stood at RM4.0935/4.1000 against the greenback, barely moved from Monday's close of RM4.0935/4.0975. The flat open followed a Monday session in which the ringgit weakened from an intraday high around RM4.0788, dragged lower by rising US Treasury yields and renewed uncertainty over US monetary policy.

What Drove the US Dollar Higher

The US Institute for Supply Management reported its Manufacturing Purchasing Managers' Index climbed to 55.6 points in July, up from 54.0 points in June and comfortably above the market consensus of 54.0 points. The upbeat reading reinforced bets that the Federal Reserve has room to raise interest rates further.

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid noted US firms had stayed resilient despite higher import tariffs and energy prices, with technology and artificial intelligence-related sectors recording particularly positive responses. Elevated freight costs, however, continued to weigh on businesses.

The US Dollar Index remained firm at 99.952 points, while crude oil prices declined on optimism that US-Iran negotiations could eventually lead to the reopening of the Strait of Hormuz.

How the Ringgit Performed Against Other Currencies

While the ringgit treaded water against the US dollar, it strengthened across the board against other majors. It rose to 2.5982/2.6027 against the Japanese yen, strengthened to 4.7104/4.7179 against the euro, and edged up to 5.4963/5.5051 against the British pound.

Against regional peers, the ringgit gained to 3.1908/3.1961 against the Singapore dollar and strengthened to 12.2468/12.2718 against the Thai baht.

What Analysts Expect Next

Mohd Afzanizam projected the US dollar-ringgit pair would maintain a narrow range of around RM4.08 to RM4.10 on Tuesday. SPI Asset Management managing partner Stephen Innes echoed that the ringgit could remain range-bound despite a strong recovery in US technology stocks.

Innes said lower US Treasury yields, supported by falling oil prices and softer inflation expectations, should provide support for regional risk assets. He cautioned, however, that those positive external factors were being offset by domestic political uncertainty.

Key Data Events This Week

Investors are turning their attention to a packed US economic calendar. The Job Openings and Labour Turnover Survey, ADP employment data, and the nonfarm payrolls report due on August 7 will be critical in determining whether the US dollar has further room to weaken.

US Treasury Secretary Scott Bessent said the Treasury remains in close contact with Japan's Ministry of Finance and the Bank of Japan on coordinated foreign exchange actions, and would not hesitate to join further intervention if needed.