Ringgit slips as AI selloff boosts dollar

The dollar’s firmer tone matters for Malaysia because the ringgit is highly sensitive to shifts in global risk appetite and US rate expectations. When investors cut exposure to equities and move into government bonds, emerging-market currencies typically lose support. That dynamic was evident after US Treasury yields fell on Thursday as buyers sought safety, a signal that often benefits the dollar relative to regional currencies.

Markets are also waiting for next week’s Federal Open Market Committee statement and press conference, with investors broadly expecting the federal funds rate to stay at 3.75% to 4.00%. Even without a policy change, any shift in the Fed’s language on growth, inflation or further easing could move the dollar and ripple through Asian currencies, including the ringgit.

The ringgit’s performance was not uniformly weak. It strengthened against most major and regional peers, rising versus the British pound and euro, and gaining against the Singapore dollar and Indonesian rupiah. It slipped against the Japanese yen and Thai baht, underscoring how the US dollar’s strength remains the main driver rather than a broad-based deterioration in Malaysia’s own fundamentals.

For investors, the immediate issue is less the size of Friday’s move than the fragility of sentiment behind it. A ringgit trading near current levels suggests markets are still comfortable with Malaysia’s external position, but any deeper unwind in AI-related equities, or a sustained fall in global yields that drives more defensive dollar buying, could pressure the currency further. The near-term test is whether next week’s Fed communication calms markets or adds to the case for more volatility in FX.