Ringgit Stability And Oil Support
The Malaysian ringgit (MYR) has been relatively stable compared with other Asian currencies during a rise in oil prices. Malaysia’s net crude oil exporter position has helped provide support. Domestic refineries meet about 66% of Malaysia’s refined oil demand. Malaysia still imports petroleum products, which remains an area of exposure. The MYR may still be affected by weakness in regional currencies. It may be less exposed to further increases in oil prices than some regional peers. Looking back to early 2025, we were encouraged by industrial production hitting its strongest point since mid-2024, driven by a booming semiconductor sector. However, the latest data from January 2026 shows this growth has moderated to a more subdued 3.5% year-on-year. This suggests the initial export surge may be losing some momentum.Implications For Hedging Strategy
The Malaysian ringgit benefited from its oil exporter status when Brent crude was pushing past $95 a barrel in late 2025. With prices now easing to around the $88 mark, that supportive cushion is diminishing, making the currency more sensitive to other factors. This shift in oil’s influence is a key change from the view we held over a year ago. Considering the softening industrial output and the pullback in crude prices, the MYR’s relative stability from 2025 appears less certain. The USD/MYR exchange rate has already drifted from 4.65 to 4.75 over the last year, showing this emerging weakness. We should therefore consider buying short-dated USD/MYR call options to hedge against or speculate on further ringgit depreciation in the coming weeks. Adding to this outlook is Bank Negara Malaysia’s recent commentary, which hints at potential rate cuts later in the year if growth continues to slow. This contrasts with the situation in early 2025 when stable rates were a given. This monetary policy divergence could further pressure the ringgit against regional currencies whose central banks remain more hawkish. Create your live VT Markets account and start trading now.
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