Malaysia’s ringgit is set to resume its upward momentum, with analysts predicting the currency could strengthen to its highest level against the US dollar in nearly a year, driven by expectations of central bank easing and government fiscal reforms.
Oversea-Chinese Banking Corp. sees the ringgit advancing to 4.15 per dollar in the fourth quarter, while Malayan Banking Bhd. forecasts 4.10 by December. MUFG Bank Ltd. projects a 1.5% gain from current levels, citing improved export competitiveness following a recent US tariff deal.
Although the currency’s rebound from its April trough has paused, upcoming inflation data may revive speculation of further Bank Negara Malaysia (BNM) cuts, encouraging fresh bond inflows. Analysts note that prospects of a Federal Reserve rate cut in September reduce the risk of dollar strength, making looser domestic policy less threatening to the ringgit. Structural reforms and fiscal discipline, they add, could further underpin sentiment.
“Sustained foreign inflows and the government’s commitment to fiscal consolidation will be crucial,” said Christopher Wong, OCBC’s executive director and forex strategist. The bank expects another BNM rate cut before year-end.
Global investors injected a record $4.3 billion into Malaysia’s bonds in the second quarter, anticipating policy easing. Their bets paid off in July when BNM delivered a 25-basis-point cut, the first among Southeast Asia’s last holdouts. Expectations of a softer dollar and looser Fed policy may further bolster demand for Malaysian debt.
Still, risks persist. Despite securing a lower US reciprocal tariff rate of 19% from a threatened 25%, analysts caution that global trade volatility remains a headwind. “The prolongation of trade uncertainty, with the risk of tariffs climbing again, could dampen growth and spark a sharper ringgit sell-off,” warned Matthew Ryan, head of market strategy at Ebury Partners.
Prime Minister Anwar Ibrahim has also rolled out a five-year growth plan through 2030, coupled with a RM2.8 billion ($665 million) stimulus package featuring cash aid and fuel subsidies. At the same time, fiscal restraint measures — including subsidy cuts and tax expansion — signal an effort to strengthen long-term finances.
“With contained inflation raising the likelihood of more BNM easing, these reforms stand as a key pillar of ringgit support,” said MUFG strategist Lloyd Chan, who expects the currency to end the year at 4.15. The ringgit last closed at 4.2120 per dollar.
Key economic events this week:
- Mon, Aug 18: Thailand Q2 GDP, Singapore non-oil exports
- Tue, Aug 19: Australia consumer confidence, Malaysia trade balance
- Wed, Aug 20: New Zealand & Indonesia rate decisions, Japan trade balance, China loan prime rates, Taiwan export orders & Q2 current account
- Thu, Aug 21: South Korea 20-day trade, New Zealand trade balance, Indonesia Q2 current account
- Fri, Aug 22: Japan CPI, Malaysia CPI
