Malaysia's Ringgit Eyes RM4 Against US Dollar on Strong GDP Forecast

Malaysia's currency, the ringgit, could soon test the psychological RM4 level against the US dollar if the nation's second-quarter economic growth surpasses expectations. Analysts anticipate a Gross Domestic Product (GDP) expansion of around 5.8% to 6.0%, fueled by robust performance in the manufacturing sector, strong exports, and solid domestic economic activity.

Dr. Paul Anthony Maria Das, a senior lecturer at Taylor's University, suggests that a positive GDP surprise, coupled with a weaker US dollar, increased foreign fund inflows, and improved global risk sentiment, could pave the way for the ringgit to break the RM4 barrier. "If the official growth exceeds 5.8%, it can provide additional positive sentiment for the ringgit, especially if the figure surpasses market expectations," he told Utusan Malaysia.

Das added that stronger growth boosts investor confidence in Malaysia's economic prospects and can support foreign capital inflows. He expects the ringgit to trade between RM4.03 and RM4.08 against the US dollar in the near term if GDP figures meet or exceed forecasts. However, he cautioned that the ringgit's movement remains dependent on the direction of US interest rates, the dollar's strength, commodity prices, geopolitical risks, and global market sentiment.

Conversely, if the official GDP figures fall below 5.8%, the ringgit might face short-term depreciation pressure, particularly if the difference from market expectations is significant. Nevertheless, Das believes the impact might not be severe if growth remains around 5.5% to 5.7%, as Malaysia's economy would still be expanding at a healthy rate.

Professor Emeritus Barjoyai Bardai from UNIRAZAK emphasized that strengthening the ringgit to RM4 requires a combination of strong domestic economic performance and a supportive external environment. He noted that while the ringgit has already strengthened considerably, a rate around RM4.07 to RM4.09 against the US dollar does not yet fully reflect Malaysia's economic fundamentals. Factors like foreign direct investment, the semiconductor and E&E sectors, AI investment cycles, data center development, tourism, and export performance are key domestic drivers. Additionally, improving fiscal positions and the prospect of lower US interest rates could further support the ringgit. Bardai concluded that this blend of domestic and external factors could create room for continued ringgit appreciation, though not necessarily in a linear fashion.

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Bagaimanapun, pergerakan ringgit masih bergantung kepada hala tuju kadar faedah AS, kekuatan dolar AS, harga komoditi, risiko geopolitik dan sentimen pasaran global.