KUALA LUMPUR (Sept 4): The ringgit is expected to continue being a regional outperformer against the US dollar, bolstered by robust domestic fundamentals and Bank Negara Malaysia’s (BNM) robust currency management, according to UOB's Quarterly Global Outlook report for 4Q 2026.
UOB projected a gradual appreciation for the local currency to 4.02 in 4Q2026, 4.00 in 1Q2027, 3.98 in 2Q2027 and 3.95 in 3Q2027.
At time of writing, the ringgit is at 4.05 against the US dollar.
It said Malaysia's growth outlook remained resilient due to continued artificial intelligence and data centre investments, a sustained current account surplus and hawkish BNM pivot,
However, shifts in US Federal Reserve policy expectations and global risk appetite will continue to influence sentiment towards emerging market currencies.
This macroeconomic momentum has prompted UOB to increase its full-year 2026 gross domestic product growth forecast to 5% from 4.5% previously, following strong performance in 1H2026.
This is inline with BNM's estimate of 4-5%.
UOB said Malaysia’s real GDP growth in 2Q2026 was 6.0% year-on-year (y-o-y), led by a 9.2% rebound in mining and quarrying, 7.3% growth in manufacturing and 6.5% growth in construction.
Domestic demand remained solid, expanding by 5.1% y-o-y as private consumption and government spending held up.
However, UOB warns of possible bumps in the road ahead. Economic growth is projected to moderate to around 4.3% in 2H2026, as favourable base effects fade and external headwinds like the Middle East conflict and El Niño risks intensify.
Additionally, this resilient domestic backdrop and rising cost pressures have triggered a policy pivot in the country.
While BNM kept its Overnight Policy Rate (OPR) unchanged at 2.75% in September, the central bank’s heightened vigilance on inflation has led UOB to adjust its monetary call.
UOB expects BNM to raise the OPR by 25 basis points to 3.00% at the Monetary Policy Committee meeting on Nov 5.