KUALA LUMPUR (Jan 15): A stronger Chinese yuan could lend further support to the ringgit in 2026 due to Malaysia’s close economic ties with China, said Maybank Investment Bank.

The ringgit is among the most sensitive Asian currencies to the yuan expected to strengthen gradually in 2026 from equity inflows, US dollar weakness and continued backing from the People’s Bank of China, Maybank head of foreign exchange research Saktiandi Supaat told a virtual briefing on Thursday.

A firmer yuan could help anchor regional currencies, including the ringgit, particularly during periods of US dollar softness in the first half of the year, he said. “A stronger-than-expected renminbi…could have positive spillover effects for Asian currencies.”

China has been Malaysia’s biggest trading partner for more than a decade and a half, making the ringgit tightly bound to the yuan than other currencies in the market. Both currencies are also on similar managed-float systems tied to a basket of currencies.

The ringgit has strengthened more than 10% against the US dollar in 2025, making it Asia’s top performing currency. The local currency ended last year at around 4.06 versus the greenback.

The investment bank's forecast is for the ringgit to appreciate and average close to 4.00 against the dollar in the first half of 2026, before backing towards 4.05 by year end. Saktiandi said the house is “moderately bearish on the US dollar early in the year”.

Under such a backdrop, Malaysia is seen as well positioned relative to peers, supported by strong external balances, sustained foreign interest in domestic assets and improving balance of payments prospects, he said.

“Malaysia’s close economic integration with China amplifies the impact of renminbi movements on the ringgit,” he said, pointing to trade invoicing, supply chain linkages and investment flows.

Domestic fundamentals, nevertheless, remain key for Malaysia, chief economist Suhaimi Ilias stressed.

“The growth narrative for 2026 is domestic-driven, supported by the investment upcycle and strong imports of capital goods,” he said during the same briefing, adding that fiscal consolidation and narrowing deficits have bolstered foreign bond inflows.