KUALA LUMPUR, Feb. 4 (Xinhua) -- Malaysia's ringgit (MYR) is set to extend its gains against the U.S. dollar, underpinned by strong foreign investment inflows, a resilient trade surplus and narrowing interest rate differentials.
UBS said in a recent note that amid multiple tailwinds for the Malaysian economy, it expects the USD-MYR downtrend to persist.
"Accordingly, we lower our USD-MYR forecasts to 3.90, 3.86, 3.83, and 3.80 by end-March, June, September, and December (previously 4.02, 4.00, 3.98, and 3.96)," the research house said.
According to UBS, foreign direct investments (FDI) in Malaysia are likely to stay robust, with capital-intensive, multi-year projects implying sustained foreign currency inflows and a rising stock of foreign-owned MYR-denominated assets, which structurally support demand for the ringgit over the medium term.
UBS also opined that the narrowing USD-MYR interest rate differentials speak for further MYR upside against the U.S. dollar.
It expects the Federal Reserve to cut rates by another 50 basis points, based on its expectations for U.S. economic growth to slow toward trend, with sequential inflation readings moving closer to target, reinforcing the disinflation trend.
In contrast, it expects the Malaysian Central Bank to keep policy rates unchanged, against a backdrop of strong domestic growth tailwinds and recovering inflation.
Meanwhile, MBSB Research said in a note on Tuesday that it is keeping its base case for the ringgit to strengthen further against the U.S. dollar in 2026, averaging the year around MYR 4.00, as compared to MYR 4.28 in 2025.
"The primary catalyst driving this sustained appreciation bias is the expected narrowing of the U.S.-Malaysia interest rate differential, in addition to Malaysia's positive growth fundamentals," said the research house. ■