This article first appeared in The Edge Malaysia Weekly on February 9, 2026 - February 15, 2026

IT was 10½ years ago, in July 2015, that Malaysia last saw the ringgit hover around 3.80 to the US dollar — a psychological level for many Malaysians, as the currency was pegged at that rate for nearly seven years from September 1998 to July 2005 to aid recovery after the 1997/98 Asian financial crisis.

The ringgit’s 3.80 level also carries political significance — not so much because the peg was imposed by Tun Dr Mahathir Mohamad after he removed his then deputy Datuk Seri Anwar Ibrahim and introduced capital controls, but because it signalled currency strength for the country and its people. It also trumps the 4.00 level breached a fortnight ago on Jan 23, buoyed by improved sentiment after advance estimates showed economic growth beating expectations for a second consecutive year.

Incidentally, July 2015 was when The Wall Street Journal reported that investigators probing the 1Malaysia Development Bhd (1MDB) money trail had traced RM2.6 billion (US$700 million) flowing into the personal accounts of then prime minister Datuk Seri Najib Razak.

It was also in July 2015 that Bank Negara Malaysia’s foreign reserves fell below US$100 billion, climbing back above that level only in August 2017. At US$125.6 billion as at Jan 15, 2026, the central bank’s reserves have risen by US$8 billion since March 2025 to an 11-year high, last seen in November 2014. Net reserves have remained above the US$100 billion mark since July 2025, central bank data shows.

Prime Minister Anwar is widely believed to be considering a general election to secure a stronger mandate, possibly as early as year-end, after tabling what is expected to be a “sweet Budget 2027”, currently scheduled for Oct 9, eight months from now.

“External factors do play a role, but currencies ultimately reflect trust in institutions, in policy direction and trust that a country is governed with discipline and purpose,” Anwar, who is also finance minister, said in his keynote address at the Malaysia Economic Forum (FEM 2026) in Kuala Lumpur last Thursday (Feb 5).

Finance Minister II Datuk Seri Amir Hamzah hinted last week that Bank Negara may revise higher its 2026 GDP growth forecast from the current official guidance of 4% to 4.5%.

This is despite a higher base last year, as advance estimates released on Jan 16 showed Malaysia’s economy is likely to have grown 4.9% in 2025, slightly above the official projection of 4% to 4.8%. Full-year growth figures will be released this Friday (Feb 13). The economy also expanded faster than expected in 2024, growing 5.1% and exceeding the official guidance of 4% to 5%.

The next catalyst for the ringgit could emerge in March — not only because Bank Negara typically releases its GDP forecast alongside its 2025 annual report. That guidance often sets the tone ahead of the advance estimate for first-quarter GDP growth in mid-April, a month before the official reading on May 15.

China is also expected to unveil its next five-year plan in March at the National People’s Congress, which begins on March 5, with its 2026 GDP growth target likely to be announced. While most economists expect China’s growth to come in below 5% this year, some analysts believe Beijing may retain a 5% target to signal a strong start to the new plan.

Beyond expectations of narrower interest rate differentials with the US, a stronger Chinese renminbi is also seen as a tailwind for the ringgit, experts say.

Talk of the ringgit “reclaiming 3.80” gained momentum after UBS AG predicted that the level could be reached by December this year.

“Given multiple tailwinds for the Malaysian economy, we think the stage is set for USD/RM to reclaim 3.80,” UBS foreign exchange strategists Tan Teck Leng and Dominic Schnider write in a Feb 2 note, pointing out that Malaysia captured 32% of Southeast Asia’s artificial intelligence funding — about US$759 million — between July 2024 and June 2025 and is likely to continue to attract robust foreign direct investment. This is underpinned by a surge in investment in data centre capacity and digital economy-related projects and services, which is expected to sustain foreign currency inflows over the medium term.

Besides UBS, at least four other research houses have since upgraded their expectations for the ringgit’s strength. Australia & New Zealand Banking Group (ANZ) expects the currency to strengthen to 3.90 by year-end and reach 3.80 in 2027, according to Bloomberg data.

Japan’s largest bank, Mitsubishi UFJ Financial Group Inc (MUFG), is even more bullish, forecasting the ringgit to strengthen to 3.70 by year-end, from 3.75 by end-September, 3.80 by end-June and 3.85 by end-March this year, Bloomberg data shows.

Meanwhile, Mizuho Bank has a 3.89 year-end forecast for the USD/RM.

Both HSBC Bank and UOB Bank now expect the ringgit to reach 3.85 against the US dollar by year-end. In January, HSBC still expected USD/RM “to mostly trade within a 4.00-to-4.10 range in 2026”.

UOB, which expects the ringgit to strengthen to 3.90 by the middle of this year, sees the ringgit firming to 3.77 against the greenback in 2027 and 3.73 in 2028, Bloomberg data shows.

UOB Bank Malaysia senior economist Julia Goh and economist Loke Siew Ting say in a Feb 5 note that the ringgit is “marking what is likely the third major phase since it was unpegged” from the US dollar on July 21, 2005.

“The latest gains were driven primarily by broad US dollar weakness and a firmer Chinese renminbi, reflecting policy shifts under Trump 2.0 that accelerated de-dollarisation, global supply-chain realignment, and expectations of US Federal Reserve monetary easing,” Goh and Loke write. “Malaysia’s domestic fundamentals — including firm growth momentum, resilient domestic demand, disciplined macro policy and strong capital inflows — provided additional support.”

The UOB economists define “Phase 1” as the period in which the ringgit was adjusting to a managed float system after the 3.80 peg to the US dollar was lifted in 2005, with the currency reaching a high of 2.939 against the greenback in July 2011.

They say the ringgit entered “Phase 2” from 2015, weakening past the 4.00 level “as external shocks and domestic confidence issues — including lower oil prices, governance concerns and the 1MDB scandal, US Fed tightening, and declining foreign exchange reserves — drove depreciation”. During this phase, the ringgit fell to 4.80 against the US dollar in 2024 “amid renewed fears of US protectionism” under President Donald Trump, fewer US Fed rate cuts, and heightened geopolitical tensions surrounding the Russia-Ukraine war, as well as conflicts in the Middle East and US-China relations.

“Phase 3” began last year, driven by the Fed’s easing cycle, a stronger Chinese renminbi, and broader de-dollarisation flows benefiting emerging markets, including Malaysia.

“Malaysia’s stable monetary framework, stronger external position, fiscal discipline, policy clarity and robust growth have further underpinned the currency, enabling it to stand out in the region. The ringgit also appears less sensitive to oil prices, following lower dependence on oil revenues, but reflects deeper economic diversification, improved external conditions, and clearer domestic governance signals,” the UOB economists say. “Malaysia’s macro fundamentals remain firm, anchored by ongoing fiscal reforms, the continued rollout of strategic national master plans, political stability and deeper regional integration.

“Nevertheless, the path ahead is not without risks. Potential wildcards that could disrupt the rally include shifts in global monetary policy, escalations in geopolitical tensions, a pause in the technology upcycle, bouts of market volatility, or unexpected weakness in Malaysia’s domestic economy and policy trajectory. The ringgit’s direction will then depend on the delicate balance between domestic resilience and external fragilities.” They note that “recent flow patterns show increased demand for shortertenured bonds on expectations of further ringgit strength, alongside speculation of a possible overnight policy rate (OPR) hike in 2H2026”.

The UOB economists say Bank Negara’s guidance on the economy and monetary policy, to be released with its 2025 annual report by March 31, “may clarify whether current market hawkishness is justified or likely to be scaled back, which could inject some volatility into the ringgit”.

Bank Negara governor Datuk Seri Abdul Rasheed Ghaffour has consistently said the central bank does not target a specific exchange rate, while maintaining orderly market conditions and price stability. Consensus expects Bank Negara to keep the OPR at 2.75% for the year.

Trump, who wants Fed rates at 1%, has nominated Kevin Warsh to succeed Fed chair Jerome Powell, whose term ends in May. Bloomberg consensus data shows that markets expect two rate cuts totalling 50 basis points this year, bringing the federal funds rate to between 3% and 3.25%.

“Is Warsh a hawk at heart, or a reformed dove? Will Warsh preserve Fed independence or will he herald radical changes at the Fed? Will Warsh be able to unite an increasingly divided Fed? Will Warsh push for lower rates in line with President Trump’s expectations, or will he surprise by instituting a smaller Fed balance sheet instead? There are many questions ahead and markets are indeed in for a ride,” UOB Bank Singapore head of market strategy Heng Koon How, senior foreign-exchange strategist Peter Chia and senior technical strategist Quek Ser Leong write in a note dated Feb 4. They see the ringgit, Singapore dollar and Chinese renminbi strengthening to 3.85, 1.24 and 6.80, respectively, against the US dollar in 2026.

At the time of writing, the ringgit was trading at 3.9483 against the US dollar and 3.10 versus the Singapore dollar. The Singapore dollar stood at 1.2728 against the US dollar, and the renminbi was at 6.9380.

Whether or not a general election is called by year-end, many Malaysians are likely to watch closely to see how soon the ringgit can reclaim the psychologically and politically significant 3.80 level — and stay above it. 

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