Ringgit rally not over yet as analysts eye Malaysia rate cuts

KUALA LUMPUR - Malaysia’s ringgit is poised to restart a rally, potentially hitting its strongest level against the US dollar in almost a year, as analysts see a dovish central bank and fiscal pledges boosting sentiment.

The ringgit may appreciate to 4.15 per US dollar in the fourth quarter on further central bank easing, according to OCBC Bank, while Maybank forecasts 4.10 by December. MUFG Bank expects a gain of 1.5 per cent from current levels as a US tariff deal boosts Malaysia’s export competitiveness.

The ringgit was trading at 4.2220 per US dollar as at 6pm local time on Aug 18. It has risen 5.8 per cent against the greenback to date in 2025. Against the Singapore currency, the ringgit was trading at 3.2919, down 0.6 per cent so far this year.

The ringgit’s rebound from an April low has stalled, but upcoming inflation data may revive expectations of Bank Negara Malaysia (BNM) rate cuts, spurring bond inflows. While looser monetary policy can weigh on currencies, prospects of

a Federal Reserve cut in September

reduce the risk of a sell-off against the US dollar.

Analysts are now focusing on the potential benefits of lower domestic rates, with currency sentiment further buoyed by government structural reforms that may support long-term growth.

Expectations for a stronger ringgit also hinge on sustained foreign inflows and the government’s “commitment to follow through on fiscal consolidation”, said Mr Christopher Wong, executive director and foreign exchange strategist at OCBC. His bank projects another rate cut by Malaysia’s central bank later in 2025.

Global funds poured a record US$4.3 billion (S$5.5 billion) into Malaysia’s bonds in the second quarter, betting the last rate-cut holdout central bank in South-east Asia would lower rates – a move BNM delivered with a 25-basis-point reduction in July. Prospects of looser US monetary policy and a weaker dollar may also stoke demand for Malaysia’s sovereign debt.

Risks remain despite Malaysia securing a reduction in the US reciprocal tariff rate to 19 per cent from a threatened 25 per cent. Some analysts warn that global trade volatility could still weigh on the ringgit.

“The prolonging of the trade uncertainty, and the lingering possibility that the tariffs land higher than current levels” present a sizeable risk for Malaysian businesses, said Mr Matthew Ryan, head of market strategy at Ebury Partners. In this scenario, “we would expect a moderate hit to Malaysia’s economy, and a more pronounced sell-off in the ringgit”, he added.

Prime Minister Anwar Ibrahim unveiled

an ambitious five-year plan to boost growth through 2030

, alongside a one-time RM2.8 billion (S$855 million) stimulus with cash handouts and lower fuel prices. But the government has also made attempts to rein in fiscal largesse, including cutting diesel subsidies and expanding the sales and service tax.

These measures, combined with contained inflation – “which could give rise to market expectations for further BNM policy easing” – are seen as a key pillar for the ringgit’s strength, said Mr Lloyd Chan, a currency strategist at MUFG, who expects the currency to reach 4.15 by the year end. 

“What stands out for the ringgit is the ongoing government-led structural reforms aimed at boosting productivity and enhancing fiscal discipline, which should provide enduring support for the currency,” he added. BLOOMBERG