(Nov 4): The ringgit is hovering near its strongest level in a year, supported by expectations that the Malaysian central bank will hold its policy rate steady and by renewed optimism over growth.
The ringgit is 0.6% away from breaching the 4.1805-per-dollar level that would mark its highest since October 2024. Expectations of an extended hold from Bank Negara Malaysia (BNM), an improving growth outlook, and foreign debt inflows are providing a tailwind for the currency.
The ringgit will be supported by the nation’s “resilient macro fundamentals, prudent fiscal management, and narrowing policy rate gap with the US”, said Lloyd Chan, a strategist at MUFG Bank Ltd. He expects the currency to strengthen to 4.15 per dollar by year end.
Malaysia’s currency is among the top performers in Asia this year after gaining about 6.4%. It is also poised for its biggest annual advance since 2017.
The country's trade-dependent economy has been buoyed by signs that global demand is picking up. Confidence rose when the US and China — Malaysia’s largest export partners — agreed at a landmark summit last week to extend their tariff truce, roll back export controls and reduce other trade barriers. US President Donald Trump and Prime Minister Datuk Seri Anwar Ibrahim also signed a trade deal last month, although the pact has since fuelled concerns about Malaysia’s interests and sovereignty in trade matters.
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The improving external demand may provide a further boost to Malaysia’s growth story, which has been driven mainly by domestic consumption. Third-quarter gross domestic product grew by 5.2%, beating all estimates in a Bloomberg survey, and faster than the pace of expansion seen in the previous three quarters.
Meanwhile, ringgit swaps are pricing for Malaysia’s overnight policy rate (OPR) to be held over the next 12 months. In mid-August, markets were expecting a quarter-point cut over the same time frame. Economists surveyed by Bloomberg also expect the nation’s benchmark rate to remain unchanged through 2026, even if the US lowers rates further.
“We expect BNM to keep its policy rate at 2.75% in November, given favourable growth-inflation dynamics,” MUFG’s Chan said.
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