Ringgit could test RM3.95 if U.S. dollar weakens and capital flows improve

The ringgit could move toward RM3.95 to RM3.98 against the U.S. dollar in the near term, but only if external conditions become more favorable, economist Law Siong Hook said.

Law, an economics professor at Universiti Putra Malaysia, said the currency should retain a moderate strengthening bias, supported by Malaysia’s solid domestic economic fundamentals. In the very short term, he considered a trading range of RM3.98 to RM4.05 per dollar reasonable.

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In the very near term, I believe a trading range of around RM3.98 to RM4.05 per U.S. dollar is reasonable.

The ringgit is approaching the psychologically important RM4 level, he said, which could bring sharper two-way volatility. Importers may increase dollar purchases, while exporters and investors may take profits on their ringgit holdings. A sustained break below RM4 remains possible, but would probably need an additional catalyst.

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A sustained break below RM4 is possible, but would most likely require an additional catalyst.

Interest-rate differences between Malaysia and the United States remain important for capital flows. Bank Negara Malaysia has kept its overnight policy rate at 2.75%, while U.S. interest rates remain higher. If U.S. rates stay high or rise further, dollar-denominated assets could remain attractive. Persistent U.S. inflation could also lead markets to expect tighter Federal Reserve policy for longer, or even further rate increases, supporting the dollar and pressuring regional currencies.

For the rest of 2026, Law sees a reasonable base range of RM3.95 to RM4.05, with a temporary move toward RM3.90 to RM3.95 if global conditions improve. He cited resilient Malaysian growth, controlled inflation, strong electrical and electronics exports, the global technology cycle, tourism receipts, investment inflows, and Malaysia’s role in semiconductor supply chains and data centers as possible sources of additional foreign-exchange inflows.

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The RM4 level is now becoming more attainable, but strengthening to RM3.95 requires a more conducive external environment and cannot rely on domestic fundamentals alone.