Ringgit Opens Higher Amid Geopolitical Tensions Ahead of FOMC Meeting Outcome

The ringgit opened marginally higher against the US dollar as investors remain cautious ahead of the US Federal Reserve's monetary policy outcome. The escalation of geopolitical tensions in the Middle East may influence the Fed's rate cut decision. The ringgit also traded higher against other major currencies and ASEAN counterparts.

The Malaysian ringgit opened marginally higher against the US dollar on June 17, 2025, as investors remain cautious ahead of the US Federal Reserve's monetary policy outcome. The decision to strengthen the ringgit comes amidst escalating geopolitical tensions in the Middle East, which may influence the Fed's rate cut decision.

The US Federal Reserve is anticipated to implement aggressive rate-cutting measures, a move that could negatively impact the US dollar. Paul Tudor Jones, founder of Tudor Investment Corp., has warned that the U.S. dollar could face a 10% depreciation over the next year due to the Federal Reserve's anticipated rate cuts [1]. This prediction is supported by the Federal Reserve's policy trajectory and the expected appointment of a "super dovish" successor to Fed Chair Jerome Powell, who is set to end his term next year.

The U.S. Dollar Index has dropped nearly 8% year-to-date, marking the worst start to a year since its inception in 2005. This dollar weakness coincides with fluctuating U.S. trade policies under the Trump administration, indicating a structural shift in market risk appetite towards dollar assets [1].

The geopolitical tensions in the Middle East, particularly the threat of an Iranian operation against US bases, have also contributed to market uncertainty. The US has ordered some staff to depart the embassy in Baghdad and authorized military service members’ families to leave the Middle East, reflecting the heightened risk environment [3].

The ringgit also traded higher against other major currencies and ASEAN counterparts, reflecting investor confidence in Malaysia's economic growth prospects. Malaysia's expanding and diversifying economy is attracting foreign investors, with the country leveraging its strategic location and stable government committed to reform [2].

Despite the Washington-triggered global trade upheaval, officials are holding to a strong outlook for this year. The Malaysian Investment Development Authority (MIDI) recorded RM378.5 billion (about US$88.2 billion) in approved investments last year, the highest in the nation’s history, and marked 14.9% year-on-year growth in investment [2].

Robust growth expectations and a stable government committed to reducing corruption make Malaysia an attractive proposition for foreign investors. The country's proximity to Singapore, a vibrant energy sector, and a young labor force further enhance its investment appeal. The Malaysia Digital Economy Corporation (MDEC) has also been instrumental in promoting the nation’s tech sector, providing valuable support to businesses like JH Growth Partners [2].

Investors should continue to monitor the Fed's monetary policy decisions and geopolitical developments in the Middle East, as these factors are likely to influence the ringgit's performance in the coming months.

References:
[1] https://www.gurufocus.com/news/2922831/paul-tudor-jones-warns-of-potential-10-decline-in-usd-amid-fed-rate-cuts
[2] https://gfmag.com/features/malaysia-leveraging-a-strategic-location/
[3] https://www.business-standard.com/amp/world-news/us-to-withdraw-some-embassy-staff-from-middle-east-as-tensions-rise-125061200132_1.html