Recent developments indicate a challenging landscape for the Malaysian Ringgit (MYR) against the Chinese Yuan (CNY) with several key factors influencing the exchange rate. Analysts observe that the MYR is currently trading at 90-day lows around 1.6856 CNY, slightly below its three-month average. This stability reflects a narrow 1.2% trading range from 1.6856 to 1.7053 CNY, suggesting limited volatility in the near term.
The Bank Negara Malaysia's recent decision to cut the Overnight Policy Rate to 2.75% has surprised many economists. This marks the first rate cut in five years, aimed at supporting the economy amid escalating global trade tensions, particularly due to U.S. tariffs on Malaysian exports. Experts note that these tariffs could exert downward pressure on the MYR, highlighting the potential for increased currency volatility tied to ongoing trade negotiations with the U.S.
Furthermore, oil prices, which significantly impact the MYR due to Malaysia’s status as a net exporter, are currently trading at $62.73 per barrel, approximately 7.2% below their three-month average. The volatility in oil prices, which have seen a notable range from $62.66 to $73.37, could further complicate the MYR's outlook as analysts project that lower oil prices may weaken the currency further against the CNY.
On the CNY side, the People's Bank of China's promotional efforts towards the digital yuan and recent measures to stabilize the currency amid ongoing trade tensions are noteworthy. The yuan has seen depreciation against major currencies, leading to intervention measures by the central bank to set stronger midpoints. Additionally, China's economy showed resilience with a reported growth of 5.2% in the recent quarter, boosted by stimulus measures, which offers some support for the yuan.
Given these dynamics, currency analysts suggest that the MYR may continue to face challenges against the CNY in the context of reduced interest rates and fluctuating oil prices, whereas structural efforts by China to stabilize and promote its currency could bolster the CNY further. Businesses and individuals engaging in transactions involving MYR and CNY should closely monitor these developments for potential impacts on exchange rates.
