MBSB Investment Bank Bhd (MBSB IB) projects that the Malaysian ringgit will remain supported by the country’s relatively strong economic fundamentals, although short-term fluctuations are expected to be influenced by shifts in US monetary policy expectations and global risk sentiment.

In a research note released yesterday, MBSB IB maintained its forecast for the ringgit to average around RM4.01 against the US dollar throughout 2026, with the currency ending the year near RM4.03. The bank highlighted that ongoing volatility is likely as market participants respond to evolving signals from the US Federal Reserve (Fed) regarding the direction of interest rates.

The firm underscored that a more sustained appreciation of the ringgit would depend on clearer evidence of disinflation in the United States. Such a development could reduce expectations of persistent Fed policy tightening, thereby improving global risk appetite. A less hawkish Fed stance would likely encourage renewed portfolio inflows into emerging markets, providing additional support to the ringgit and other currencies in the region.

Despite the resilient domestic economic outlook, MBSB IB noted that Malaysia’s equity market saw a reversal in foreign investment trends. August 2026 registered a significant net foreign outflow of US$426 million, following a net inflow of US$74 million in July. This shift indicates continued sensitivity to external factors affecting investor sentiment.

In the bond market, foreign holdings of Malaysian local debt securities declined by RM5.6 billion, dropping from RM309.8 billion in June 2026 to RM304.2 billion in August. This reduction in foreign investment in local bonds further reflects investor caution amid uncertain global monetary conditions.

Overall, while domestic economic indicators remain robust, external influences—particularly US monetary policy decisions and global risk dynamics—are expected to continue shaping the ringgit’s trajectory in the near term.