RINGGIT SEEN AT 3.70 VS GREENBACK BY END-2026 - MUFG

KUALA LUMPUR, Feb 12 (Bernama) -- MUFG Bank Ltd expects the ringgit to strengthen toward 3.70 against the US dollar by end-2026, underpinned by a more durable appreciation cycle driven by structural fundamentals.

Its senior currency analyst, Lloyd Chan, said the forecast is anchored in sustained information and communications technology (ICT)-led investment inflows, macroeconomic stability, supportive policy settings, and improving capital flows.

“Malaysia’s economy is undergoing a strong investment cycle that will support its medium-term growth outlook,” he said in a research note today.

Investment approvals in manufacturing and services rose 14.7 per cent year-on-year in the first nine months of 2025, with foreign direct investment contributing to the capital expenditure upcycle.

Chan said this reflects renewed confidence in Malaysia’s policy framework, infrastructure and role in regional supply chains.

“Sustained foreign direct investment inflows typically support the currency by lifting productivity and strengthening external balances over time,” he added.

Chan highlighted that ICT has emerged as the largest contributor to total approved investments, with strong foreign participation since 2022. Malaysia’s ICT investment approvals surged about 32 per cent year-on-year in the first nine months of 2025.

Chan said Malaysia’s macroeconomic stability has compressed risk premiums, with inflation remaining contained despite RON95 fuel subsidy rationalisation and adjustments to sales and services tax, allowing Bank Negara Malaysia (BNM) to maintain policy stability.

“Fiscal discipline keeps sovereign risks in check, supporting investor confidence in local financial markets,” he said.

MUFG Bank is a Japanese bank and the core banking subsidiary of the Mitsubishi UFJ Financial Group.

The bank also expects BNM to keep the overnight policy rate (OPR) at 2.75 per cent through 2026, maintaining a neutral stance, while further US Federal Reserve easing narrows rate differentials.

“This enhances Malaysia’s relative yield appeal and has already supported a steady pickup in net foreign bond inflows since 2024,” Chan added.

He said reasonable equity valuations, a solid macroeconomic backdrop and the ongoing technology upcycle position Malaysia for renewed foreign equity interest, providing further upside for the ringgit.

External tailwinds are also turning more favourable, he said, citing firmer commodity prices that support terms of trade and stronger US capital expenditure in computers and peripherals, benefiting the electronics sector. Continued resilience in the Chinese yuan, given its strong correlation with the ringgit, also underpins the local currency.

Downside risks to the outlook include a sharp global growth slowdown, a significant fall in commodity prices or a downturn in the global electronics cycle.

The ringgit climbed to a fresh high of 3.8995 against the US dollar on Thursday, hovering near its strongest level in almost eight years.

It last traded around that level on April 23, 2018, at 3.8965/8995 against the greenback.

-- BERNAMA