KUALA LUMPUR: The ringgit is expected to continue strengthening against the US dollar, with its 2026 forecast revised to average around RM3.92 (2025 average: RM4.28), said MBSB Investment Bank Bhd.
An MBSB research note today said it will be underpinned primarily by a slight narrowing in the differential between Malaysia’s overnight policy rate (OPR) and the United States federal funds rate, as the Federal Open Market Committee’s latest dot plot continues to signal the potential for one more rate cut.
The research house also said a stronger dollar may influence the ringgit’s outlook, with market players recent shift to price in no rate cuts this year, in response to higher oil price shocks and potentially prolonged tensions in the West Asia.
"Our baseline assumes one possible -25 basis points (bps) cut by the US Fed this year, in contrast with a neutral hold at 2.75 per cent for Malaysia's OPR.
"We expect the ringgit to experience volatility during a period of increasing geopolitical uncertainty. Elevated US inflation and global geopolitical tensions remain the primary 'wildcards' in our forecast,” it said.
Should these risks materialise, MBSB IB said the Fed may further delay its policy easing cycle.
"Such a delay would create a substantial headwind, potentially capping the ringgit’s current appreciation trend.
"Over the past month, the ringgit’s appreciation bias has continued, bolstered by a series of robust economic data releases. The currency has maintained its strength even in the face of a rebounding US dollar, successfully breaching the RM3.90 level,” it said.
This was supported by market confidence in Malaysia’s domestic recovery, it said.
"We project the MBSB Trade Weighted Ringgit Index (TWRI) to reach 102.0 by year-end 2026, up from 98.4 at end-2025.
"This forecast reflects the ringgit’s broad-based strength against the currencies of Malaysia’s major trading partners,” it said.
At the same time, MBSB IB said this resilience is currently anchored by stable monetary policy and robust economic growth, while rising inflationary pressures, driven by elevated energy costs, may lead to a hawkish pivot from the central bank in the near term.
"This favourable macroeconomic backdrop remains a primary catalyst for the ringgit’s outperformance against regional and global peers, supported by BNM’s assessment of sustained domestic expansion,” it added. - Bernama
