The Malaysian ringgit weakened for a fourth consecutive session on Thursday, with USD/MYR trading around 4.07, as foreign investors continued to pull money out of Malaysian equities. Commerzbank, which published the assessment this week, attributed the slide to equity-linked portfolio outflows and argued that Bank Negara Malaysia’s hawkish policy stance should keep the currency’s losses in check.
The move extends a run of softness that has left the ringgit among the more closely watched Asian currencies this quarter. Foreign selling on Bursa Malaysia has been the dominant flow story, with proceeds from equity disposals converted into dollars and other currencies, adding steady demand for USD/MYR.
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Why outflows are driving the pair
Currency moves of this size rarely come from a single source. In this case, the pressure is largely mechanical: when overseas funds reduce exposure to Malaysian stocks, they convert ringgit into their home currency to repatriate the money. That conversion shows up as buying in USD/MYR rather than as a judgment on Malaysia’s economy.
The pattern is familiar across emerging Asia. Regional currencies have moved in step with shifts in global risk appetite and the direction of the dollar, and equity flows have become a more visible short-term driver than trade balances for many of these pairs. For the ringgit, the equity channel has been particularly influential this year because foreign participation in Malaysian stocks is concentrated in a relatively small group of large-cap names.
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A fourth straight session of weakness also matters psychologically. Momentum traders tend to lean against a currency once a clear trend forms, which can extend a move beyond what underlying flows alone would justify.
What the ‘hawkish tilt’ actually does
Commerzbank’s framing is essentially this: outflows are pushing one way, and Bank Negara Malaysia’s policy stance is pushing the other. When a central bank is seen as reluctant to cut rates, or as willing to keep policy tight, the interest-rate gap with the United States narrows from the ringgit’s perspective. That makes ringgit-denominated assets relatively more attractive and gives domestic investors less reason to shift money offshore.
This is a brake, not an accelerator. A hawkish stance does not create demand for the ringgit on its own, and it does not stop foreign funds from selling equities if their risk appetite changes. What it does is raise the level at which sellers encounter resistance, which is why analysts often describe the currency’s downside as limited rather than reversed. For a broader read on how central bank language moves currencies, the Bank for International Settlements publishes regular research on the topic.
It is worth being precise about what “limited downside” means in practice. It is a directional bias, not a forecast, and it can be overtaken by a shift in the dollar or a larger wave of regional outflows.
What readers should watch next
- Foreign flow data from Bursa Malaysia. Weekly net buying or selling by overseas investors is the clearest read on whether the pressure is easing or building.
- The dollar’s own direction. A softer US dollar would lift most Asian currencies, including the ringgit, without any change in domestic policy.
- Bank Negara Malaysia’s policy language. Any shift toward a more neutral tone would remove part of the support Commerzbank is highlighting.
- Regional spillover. If other Asian currencies stabilize, the ringgit usually finds it easier to do the same.
Malaysia’s export base — electronics, palm oil, and energy-related shipments — gives the ringgit a structural source of dollar earnings that cushions it during equity-driven selloffs. That is one reason sharp moves in USD/MYR have historically tended to fade rather than extend without a broader catalyst. Traders will get their next clear test when the latest foreign flow figures for Malaysian equities are published, and again if the central bank adjusts its guidance at its next scheduled policy statement.
This article is for information only and is not financial advice. Currency markets are volatile and exchange rates can move sharply in either direction.
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