KUALA LUMPUR (Nov 7): Economists expect further gains for the Malaysian ringgit against the US dollar after the local currency rallied to its strongest level since October last year, supported by resilient domestic demand and improving external conditions.

The ringgit may trade at 4.18 against the greenback towards the end of the year, before strengthening further to 4.10 by end-2026, according to the median forecast in a Bloomberg poll of more than two dozen currency strategists. 

The positive outlook reflects Malaysia’s sound fiscal management, a narrowing monetary-policy gap with the US Federal Reserve, and the potential of firmer external demand following a clearer outlook on US tariff risks.

At the time of writing on Friday, the ringgit rose 0.2% to 4.1775 against the greenback — its strongest level since October 2024 — as investors pared back expectations of an interest-rate cut by Bank Negara Malaysia (BNM) and turned more optimistic on the country’s growth prospects.

Year to date, the ringgit has appreciated over 7% against the US dollar, extending its outperformance among regional peers for the second consecutive year.

It has gained broadly across Asia, led by double-digit gains against the Indonesian rupiah (10.80%) and the Vietnamese dong (10.55%).

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid expects the ringgit to maintain its appreciation bias in the near term, as he foresees that BNM is likely to keep the overnight policy rate (OPR) at 2.75% throughout 2026, given the continued strength in domestic economic activity.

“If that happens, the narrowing gap between the US Federal Funds Rate and the OPR will make ringgit assets increasingly attractive from an interest-rate differential perspective,” Afzanizam told The Edge.

“The main data point to watch will be Malaysia’s third-quarter (3Q2025) gross domestic product (GDP), which will be announced next Friday (Nov 14). We expect the outturn to be within the advance estimate of 5.2%,” he added.

In a separate note, MUFG Bank said the ringgit’s recent strength has also benefitted from the rebound in the Chinese yuan, following an easing of global trade tensions.

“Notably, the 0% US tariff on Malaysian palm oil, coupled with Malaysia’s strategic role in rare-earth exports to the US, adds to the ringgit’s tailwind,” it said.

Still, UOB Malaysia senior economist Julia Goh cautioned that downside risks remain.

“Markets could reprice the extent of US rate cuts, or geopolitical and trade tensions could re-escalate, both of which may dampen ringgit sentiment,” she said.

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