Ringgit Climbs Against US Dollar and Regional Peers as Softer US Consumer Data Eases Rate Expectations
KUALA LUMPUR: The ringgit extended its gains at the end of the trading week, strengthening against the US dollar, major global currencies and regional peers as investors reassessed expectations for future US monetary policy following signs of softer consumer demand in the world’s largest economy.
Although the United States reported stronger-than-anticipated economic growth for the first quarter of 2026, financial markets focused on the underlying details of the data, which suggested that household spending remained subdued despite the headline improvement.
The shift in investor sentiment reduced expectations of additional aggressive interest rate increases by the US Federal Reserve, providing support for emerging market currencies, including Malaysia’s ringgit.
By the close of trading at 6pm, the Malaysian currency appreciated to 4.0860/4.0910 against the US dollar, compared with Thursday’s closing level of 4.1160/4.1200.
SPI Asset Management managing partner Stephen Innes said investors were encouraged by evidence showing that much of the US economic expansion came from government expenditure and capital investment rather than broad-based consumer demand.
He noted that weaker household spending has prompted markets to scale back expectations of tighter monetary policy, leading to lower US Treasury yields and renewed demand for Asian currencies.
According to recently released figures, the US economy expanded by 2.1 per cent during the first quarter of 2026, outperforming economists’ consensus forecast of 1.6 per cent.
However, analysts pointed out that consumer expenditure—the largest contributor to US economic activity—increased by only 0.5 per cent, suggesting that domestic demand remained relatively soft despite overall economic growth.
Meanwhile, the Personal Consumption Expenditures (PCE) inflation index, the Federal Reserve’s preferred inflation gauge, recorded an annual increase of 4.1 per cent in May, matching market expectations.
Bank Muamalat Malaysia chief economist Dr Mohd Afzanizam Abdul Rashid said the detailed GDP figures revealed a less robust economic picture beneath the headline numbers.
He explained that much of the inflationary pressure appeared to stem from higher fuel and energy costs rather than excessive consumer demand, meaning additional interest rate hikes may have only a limited effect in reducing inflation.
The softer outlook for monetary tightening helped improve sentiment towards regional currencies throughout Friday’s trading session.
The ringgit also recorded gains against other major international currencies.
It strengthened against the British pound, the euro and the Japanese yen, reflecting broader weakness in the US dollar and improving demand for Asian currencies.
Within the region, the Malaysian currency appreciated against the Singapore dollar, Thai baht, Indonesian rupiah and Philippine peso.
Currency analysts believe the ringgit’s latest advance reflects growing confidence that the Federal Reserve could adopt a more measured approach if future economic indicators continue to show slowing consumer activity.
They added that lower US bond yields generally improve investor appetite for higher-yielding emerging market assets, benefiting currencies such as the ringgit.
Going forward, market participants are expected to closely monitor upcoming US inflation reports, employment data and Federal Reserve communications for further indications on the direction of interest rate policy.
While external uncertainties, including geopolitical developments and global market volatility, continue to influence foreign exchange markets, analysts believe the ringgit could remain relatively well supported if expectations of a less aggressive US monetary stance continue to strengthen.
