MUFG expects USD/MYR to keep moving lower, with a level of 3.7000 projected by end‑2026. This is linked to a longer ringgit appreciation phase supported by structural factors.
Malaysia is in an ICT-led investment upcycle, with total investment approvals in manufacturing and services up 14.7% year-on-year in 9M25. ICT is the largest contributor, and ICT investment approvals rose by about 32% year-on-year over the same period.
Inflation is described as contained despite RON95 fuel subsidy changes and adjustments to sales and services tax. Bank Negara Malaysia is expected to keep its policy rate at 2.75% through 2026, alongside a narrowing of rate differentials as US policy eases.
Net foreign bond inflows have been rising since 2024. External conditions mentioned include firmer commodities, demand for electronics, and resilience in the Chinese yuan.
Risks to this outlook include a sharp global growth slowdown, a decline in commodity prices, or a downturn in the global electronics cycle. The article notes it was produced using an AI tool and reviewed by an editor.
We see the USD/MYR pair continuing its downward trend with a year-end target of 3.7000. This is based on a view that a lasting Ringgit appreciation cycle is underway. The current environment presents a clear opportunity for positioning in the coming weeks.
For traders looking to act on this view, buying USD put options with three to six-month tenors is a sensible strategy. This allows for participation in the expected decline of the currency pair while capping potential losses. Given the clear downward trajectory, these positions can be initiated now to capture the anticipated move.
This outlook is reinforced by Malaysia’s ongoing ICT-led investment cycle, a trend we saw strengthen throughout 2025. Recently released full-year 2025 data from the Malaysian Investment Development Authority (MIDA) confirmed a 15% year-on-year increase in total approved investments. Foreign direct investment into the technology sector continues to be a primary driver of this growth.
Macroeconomic stability also provides a solid foundation for a stronger Ringgit. The January 2026 inflation print came in at a manageable 2.1%, showing that the subsidy rationalizations from last year have been well absorbed. This stability allows Bank Negara Malaysia (BNM) to hold its policy rate steady, maintaining the Ringgit’s yield advantage.
We are already seeing this stability translate into capital flows. BNM figures for January 2026 showed another month of healthy net foreign inflows into the local bond market, continuing the positive pattern established back in 2024. This consistent demand for Malaysian debt provides direct support for the currency.
External factors are also lining up favorably, particularly with the global electronics cycle. The latest industry reports for January 2026 point to a robust 8% year-on-year rise in global semiconductor sales. This directly benefits Malaysia’s export-oriented economy and further strengthens the case for the Ringgit.
Even traders holding long USD/MYR positions should consider the downside risks to the pair. The fundamental picture is strong enough that hedging against a fall in USD/MYR is prudent. Purchasing some out-of-the-money puts could be a cost-effective way to protect against a sharper-than-expected Ringgit appreciation.
