Ringgit Likely To Appreciate To 3.94 Against US Dollar By End-2026 - AmBank
KUALA LUMPUR, Jan 22 (Bernama) -- AmBank anticipates that the ringgit will trade within a range in the first half of 2026, before approaching the 3.94 level against the US dollar in the latter half of the year, supported by Malaysia’s positive economic outlook.
AmBank chief economist Firdaos Rosli said the incoming United States Federal Reserve’s (Fed) rate cuts and other US-centric issues were expected to weaken the greenback.
He also expects the gradual appreciation pathway for the yuan to create room for other trade-dependent Asian currencies to strengthen.
Firdaos said the bank expects two Federal Reserve rate cuts in 2026 -- one more than projected in the Fed’s December Summary of Economic Projections (SEP) -- reflecting market consensus and evolving economic risks, including the appointment of a new Fed chair.
The SEP baseline is a set of economic projections released quarterly by the Federal Open Market Committee (FOMC) of the Fed.
“The target for the ringgit seems realistic. If the Fed chair is not Jerome Powell in the next month or two, the likelihood of a Fed rate cut increases. This would mean that the interest rate differential would favour the ringgit over the US dollar," he told a media briefing on AmBank’s macroeconomic outlook for 2026 here today.
Net cumulative foreign fund flow into all ringgit-fixed income securities stood at RM25.6 billion in 2025 versus RM4.8 billion in 2024, while net cumulative flows into Malaysian Government Securities (MGS) were RM21.2 billion against RM1.8 billion in the previous year.
Firdaos said Malaysian bonds were expected to benefit from the continued search for safe-haven alternatives, with the ringgit likely to see ancillary support.
AmBank also maintained its view that Bank Negara Malaysia (BNM) would maintain its key policy at 2.75 per cent, barring any significant shift in economic conditions, an outcome which the bank viewed as unlikely in the near-term.
“There is no compelling reason to move the OPR level this time. The level gives a buffer for anything that may happen, but we also need to remember that the 2.75 per cent rate was a pre-emptive act by BNM last year, as they initially expected that the US tariff would have an impact on the country’s growth in 2025,” he said.
Meanwhile, AmBank expects Malaysia’s headline inflation to remain subdued at 1.8 per cent in 2026, picking up from an estimated 1.4 per cent in 2025, primarily reflecting a low base effect and the anticipated lagged cost pass-through from water tariff adjustments and the expansion of the Sales and Services Tax (SST).
However, the bank said upward pressure would be partially offset by softer global commodity prices, particularly oil and coal, which should translate into lower fuel and electricity prices, together accounting for about 8.2 per cent of the Consumer Price Index basket.
-- BERNAMA