Malaysia’s ringgit is poised for a gradual recovery against the US dollar by 2026, according to recent analyst forecasts, as improving domestic economic conditions and a potential shift in US monetary policy support the currency.
Analysts from major financial institutions project the ringgit to trade between 4.20 and 4.40 against the US dollar by the end of 2026, strengthening from its current levels near 4.70. The outlook hinges on Malaysia’s sustained economic growth, narrowing current account surplus, and expectations that the US Federal Reserve will begin cutting interest rates in late 2025, reducing the dollar’s yield advantage.
What happened
In recent months, the ringgit has faced persistent pressure from a strong US dollar and elevated US interest rates. However, Bank Negara Malaysia has maintained its overnight policy rate at 3.00% since May 2023, providing some stability. The central bank’s foreign exchange reserves remain adequate, standing at $116 billion as of November 2024. Meanwhile, Malaysia’s gross domestic product grew 5.3% in the third quarter of 2024, exceeding expectations, and exports have shown signs of recovery, particularly in the electronics and palm oil sectors. The government’s fiscal consolidation efforts, including subsidy rationalization and the gradual implementation of the goods and services tax, are also expected to improve investor confidence.
Why it matters
A stronger ringgit would reduce import costs for businesses and consumers, potentially easing inflationary pressures on goods such as food, fuel, and machinery. For Malaysian exporters, particularly in manufacturing and commodities, a firmer currency could compress profit margins if not hedged. The currency’s trajectory also affects foreign direct investment decisions, as a stable or appreciating ringgit signals economic resilience. For everyday Malaysians, a stronger ringgit could lower the cost of overseas travel and education, while also influencing the value of remittances and foreign-currency savings. The outlook is closely watched by the central bank as it balances growth and price stability.
What's next
Key factors to monitor include the US Federal Reserve’s policy path, China’s economic recovery, and commodity price trends. Bank Negara Malaysia is expected to keep rates steady through 2025, barring unexpected inflation spikes. The government’s 2025 budget, which targets a fiscal deficit of 3.8% of GDP, will be crucial for investor sentiment. Any escalation in global trade tensions or geopolitical risks could derail the recovery. Analysts advise businesses to implement hedging strategies to manage currency volatility.
