KUALA LUMPUR (Jan 19): HSBC Global Investment Research expects ringgit strength in 2026 to be limited, citing portfolio outflows and requirements of the US-Malaysia trade deal.

Under the US-Malaysia agreement of reciprocal trade, Malaysia is required to import more from the US and also invest in the US, HSBC Head of Asia FX Research Joey Chew said during an outlook webinar on Monday.

“There is some natural recycling of the inflows that Malaysia has been getting and continues to get,” she said, which will weigh on the ringgit. 

"Concerns over Malaysia’s export competitiveness may also limit ringgit strength," said Chew.

While the potential headwinds may weigh on ringgit strength, HSBC noted the currency will remain supported by foreign income repatriation by government-linked companies (GLCs).

“Stabilisation or mild improvement in commodity prices will help GLCs and their repatriation efforts,” she added.  

Meanwhile, Chew noted that while the US dollar is expected to remain under pressure in 2026, its decline is expected to be more gradual compared with last year's.

All in all, HSBC forecasts the ringgit to weaken against the US dollar to 4.10 at end-2026, from its current level of 4.0562, according to a statement on Monday.