KUALA LUMPUR (Feb 12): MUFG Bank sees more room for the ringgit to appreciate against the US dollar, possibly touching levels last seen over a decade ago.

Structural fundamentals are expected to fuel a more durable appreciation cycle, premising the Japanese bank’s view for the local note to trend towards 3.70 by end-2026, it said in a note on Thursday.

The bank sees the ringgit trending towards 3.85 versus the US dollar in 1Q2026, 3.80 in 2Q2026, 3.75 in 3Q2026 and 3.70 in 4Q2026.

The ringgit staged a strong performance in 2025, gaining more than 10%. This year, the local note has appreciated by nearly another 4%. It traded at 3.9028 at the time of writing.

Supporting fundamentals include the Malaysian economy’s ICT-led investment upcycle, macroeconomic stability, neutral monetary policy stance and reasonable equity valuations, it noted.

Meanwhile, external tailwinds are also turning more supportive. Firmer commodity prices support terms of trade, while the electronics sector benefits from rising US capital expenditure in computers and peripherals, it noted.

Continued Chinese yuan resilience further underpins the ringgit, the bank said, given the two currencies’ strong correlation.

“Downside risks to our ringgit outlook include a sharp global growth slowdown, a significant decline in commodity prices, or a downturn in the global electronics cycle,” it said.