The USD/MYR currency pair weakened on Thursday as US President Donald Trump’s tariff plans and a cautious approach from Federal Reserve policy makers prompted market players to reassess US interest rate outlook.

US President Trump announced this week sector-wide tariffs on pharmaceuticals and semiconductor chips would begin at “25% or higher.” The Trump administration also plans to impose similar tariffs on automobiles as early as April 2nd.

The minutes of the Federal Reserve’s January meeting showed policy makers had stressed on upside risks to inflation, resulting from potential shifts in trade and immigration policies, geopolitical disruptions to supply chains and stronger-than-expected household spending.

The high level of uncertainty warranted a cautious approach when considering further monetary policy adjustments, the minutes showed.

Many Fed officials suggested that the policy rate could be kept at a restrictive level in case the economy remained robust and inflation – elevated.

Several officials noted that it would be appropriate to lower the policy rate in case labor market conditions weakened, economic activity slowed, or inflation moved back to the 2% target faster than expected.

“Trump’s policies … no doubt added complexity to the Fed’s balancing act between inflation and employment, forcing policymakers to lean into a wait-and-see approach,” Yeap Jun Rong, market strategist at IG, was quoted as saying by Reuters.

“That said, with market expectations already well aligned for a rate hold over the next two FOMC meetings, the minutes served more as confirmation of existing sentiment.”

Meanwhile, on the data front, Malaysia’s trade surplus has shrunk to MYR 3.6 billion in January from MYR 10.2 billion in the same month of 2024. It has been the smallest trade surplus since April 2020.

The USD/MYR currency pair was last down 0.28% on the day to trade at 4.4255.