US Dollar's counterpart, the Malaysian Ringgit, witnesses a modest boost, buoyed by optimism around potential agreements on US tariffs.
In a significant development, the Malaysian ringgit has shown signs of strength against various currencies, including the British pound, euro, Japanese yen, Philippine peso, and Singapore dollar, as well as mixed performance against its ASEAN counterparts. This upturn in the Malaysian currency's value is largely attributed to the potential softening of US tariffs on Malaysian exports, initially announced at 24%, which could now be reduced to around 10%.
The US had imposed a 24% reciprocal tariff on Malaysian exports, effective from July 2025, primarily affecting exports to the US, which accounted for 13% of Malaysia’s exports by 2024, especially in electronics and semiconductors. Trade negotiations between Malaysia and the US, scheduled to conclude by July 8, 2025, aim to reduce or cancel these tariffs.
A successful outcome, such as lowering tariffs to around 10%, would stimulate a market rally and improve investor confidence, particularly in technology, manufacturing, and export-driven sectors. A softer tariff would likely strengthen the Malaysian ringgit by boosting export prospects and stabilizing trade relations with the US, Malaysia’s important trading partner. It would also enhance Malaysia's position as a beneficiary in regional supply chains and emerging sectors like AI and data centers via "friendshoring" trends.
Conversely, if tariffs remain high at 24%, there could be negative market reactions, including sector sell-offs in export-reliant industries and pressure on the ringgit. However, the overall market sentiment is expected to improve with tariff clarity, promoting more multinational investments and stabilizing Malaysia’s economy. Banking stocks may rebound from previous declines, while export-oriented sectors would regain momentum if tariffs soften.
Bank Muamalat Malaysia Bhd chief economist, Afzanizam Rashid, stated that a modest rebound in the market was partly due to optimism about a potential softer set of tariffs in Washington. The ringgit, which weakened earlier in the session, reaching RM4.2383, later recovered to as high as RM4.2175 during the same session. At 6pm, the local currency appreciated to 4.2180/4.2260 against the greenback, compared to its close of 4.2195/4.2255 the previous day.
This potential positive catalyst for the Malaysian ringgit and market sentiment encourages trade stability and investment inflows, thereby promoting a more optimistic outlook for Malaysia's economy.
The lowering of US tariffs on Malaysian exports from 24% to around 10% could strengthen the Malaysian ringgit, offering an advantage in the finance and business sectors. This economic improvement would be particularly noticeable in technology, manufacturing, and export-driven industries, boosting investor confidence and potentially leading to a market rally.
The successful negotiation of reduced tariffs between Malaysia and the US could enhance Malaysia's position as a beneficiary in regional supply chains, especially in emerging sectors like AI and data centers, which could stimulate further investment and growth in the industry.
