Ringgit nears 1-year high on rate outlook, growth optimism

The ringgit has gained about 6.4% against the US dollar so far this year, making it one of Asia’s top-performing currencies. (EPA Images pic)

KUALA LUMPUR: Malaysia’s ringgit is hovering near its strongest level in a year, buoyed by expectations that the central bank will keep policy rates steady and by renewed optimism in the nation’s growth outlook.

The currency is 0.6% away from breaching RM4.1805 per dollar, a level that would mark its highest since October 2024, and is on track for its biggest annual gain versus the greenback since 2017.

“Malaysia’s ‘resilient macro fundamentals, prudent fiscal management, and narrowing policy rate gap with the US’ will support the ringgit,” said Lloyd Chan, a strategist at MUFG Bank Ltd.

He expects the currency to strengthen to RM4.15 per dollar by year-end.

The ringgit has gained about 6.4% against the dollar so far this year, making it one of Asia’s top-performing currencies.

Against the Singapore dollar, it’s trading less than 1% away from its strongest level since September 2022.

Both economies have tight trading ties and share one of the busiest land borders in the world.

Malaysia’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.

President Donald Trump and Prime Minister 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.

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 policy rates 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 favorable growth-inflation dynamics,” MUFG’s Chan said.