The Malaysian Ringgit is anticipated to strengthen, with Kenanga Research forecasting it could reach RM4.07 against the US dollar next week, and maintaining a year-end forecast of RM3.95. This outlook is supported by Malaysia's robust gross domestic product growth, contained inflation, a strong external position as a net energy exporter, and a credible monetary policy framework. These factors suggest the currency's current weakness is not aligned with its intrinsic value, according to Sunway University professor of economics Yeah Kim Leng. The ringgit's performance in 2025 saw it gain up to 10% against the US dollar, trading around the 4.05 to 4.07 mark.
Despite these positive domestic factors, the ringgit faces immediate headwinds from external pressures, particularly a stronger US dollar fueled by expectations of prolonged high US interest rates. The US Federal Reserve's recent 25 basis point rate hike, lifting its benchmark interest rate to a target range of 3.75% to 4%, and hawkish signals from Fed officials have revived expectations of further rate increases. This has led to the US Dollar Index (DXY) climbing above 101, making investors hesitant to rebuild ringgit long positions. However, the dollar's resilience, even with Brent crude briefly slipping below $100 per barrel, indicates that Fed pricing, rather than energy prices, is now a primary driver of USD demand.
Analysts are closely watching upcoming US economic data, including the Personal Consumption Expenditures (PCE) inflation report and the September nonfarm payrolls report, which could influence the Fed's future interest rate decisions. Consensus estimates point to an inflation rate of 3.7% for September and around 100,000 new US jobs. Stronger-than-expected figures could reinforce expectations of an October rate hike and extend the dollar's rally. Still, the Ringgit is expected to trade within a narrow range of RM4.07 to RM4.10 against the US dollar next week, according to Bank Muamalat Malaysia Bhd chief economist Dr. Mohd Afzanizam Abdul Rashid.
Other forecasts suggest varying outcomes. CIMB Treasury and Markets Research has a more bearish outlook for the USD/MYR at 4.08 in Q3 2026 and 4.11 in Q4 2026, before strengthening to 4.07 in Q1 2027. Socio-Economic Research Centre executive director Lee Heng Guie sets a year-end target for the ringgit against the US dollar between 4.05 and 4.10. While short-term volatility is anticipated due to capital flow volatility, shifting geopolitical tensions, and the fluctuating Chinese yuan, the underlying strength of Malaysia's economy and its position as a net energy exporter are expected to provide support for the ringgit in the longer term.
