KUALA LUMPUR: The ringgit’s appreciation cycle is likely to remain durable, with MUFG Bank projecting the US dollar-ringgit pair to trend towards 3.7000 by end-2026, supported by structural economic strengths and improving capital flows.
In a note, senior currency analyst Lloyd Chan said the constructive outlook is underpinned by Malaysia’s ICT-led investment upcycle, sustained macroeconomic stability, supportive policy settings and more favourable external conditions.
Investment approvals across both manufacturing and services increased 14.7% year-on-year (y-o-y) in the nine months of 2025, with foreign direct investment contributing to the capex upcycle.
It noted that ICT has emerged as the largest contributor to total approved investments, with strong foreign participation since 2022. Notably, ICT investment approvals jumped about 32% y-o-y in the nine months of 2025.
MUFG said the shift towards high-value, technology-driven investments marks a more sustainable growth cycle compared with past commodity-led expansions, helping to strengthen productivity and external balances over time.
Macroeconomic stability is also compressing risk premiums. Inflation remains contained despite RON95 fuel subsidy rationalisation and adjustments to sales and services tax, allowing Bank Negara Malaysia (BNM) to maintain policy stability.
Fiscal discipline has also kept sovereign risks in check, supporting investor confidence in local financial markets.
“We expect BNM to maintain a neutral policy stance, keeping the policy rate at 2.75% through 2026, while further Fed easing should continue to narrow rate differentials.
“This will enhance Malaysia’s relative yield appeal and has already helped drive a steady pickup in net foreign bond inflows since 2024,” MUFG said.
The research house added that Malaysian equities could attract renewed foreign interest, given reasonable valuations, a supportive macro backdrop and the ongoing global technology upcycle.
Externally, firmer commodity prices and resilient electronics demand, particularly linked to US investment in computers, semiconductors and AI-related infrastructure, are seen as additional tailwinds. Continued strength in the Chinese yuan is also supportive, given its close correlation with the ringgit.
However, MUFG cautioned that risks to its ringgit outlook include a sharp global growth slowdown, a significant decline in commodity prices and a downturn in the global electronics cycle.
