Ringgit Poised for Continued Strength Ahead of BNM Rate Decision

KUALA LUMPU: The ringgit is anticipated to maintain its upward momentum next week, driven by expectations that Bank Negara Malaysia (BNM) will hold the Overnight Policy Rate (OPR) at 2.75% during its Monetary Policy Committee meeting on September 3.

Dr. Mohd Afzanizam Abdul Rashid, chief economist at Bank Muamalat Malaysia Bhd, noted there was little indication for BNM to adjust its current monetary stance. He emphasized that the economy had shown strong performance, with Q2 GDP growth reaching 6%, while inflation remained under control at 1.9% in Q2 2026, up from 1.6% in Q1.

“Given BNM’s likely decision to maintain rates, this stability serves as a positive factor supporting the ringgit,” Dr. Mohd Afzanizam told Bernama.

He also highlighted that expectations for a U.S. interest rate increase have diminished following weaker-than-expected labor market data in July and the U.S. Treasury’s recent actions in the bond market. The probability of a September rate hike has dropped from over 50% to around 30%.

For the coming week, Dr. Mohd Afzanizam projected the ringgit to trade between RM4.03 and RM4.04, closely watching key U.S. economic indicators including non-farm payrolls and ISM manufacturing data.

“Consensus forecasts suggest the August NFP report may show the addition of 45,000 jobs, contrasting with the unexpected loss of 23,000 jobs in July,” he stated.

Stephen Innes, a global strategist at Quintex Intel, expects the ringgit to remain within a narrow range as investors await the crucial NFP release on September 4. “The NFP data carries significant influence over both U.S. interest rate expectations and the dollar’s direction, which directly impacts emerging Asian currencies like the ringgit,” he commented.

Kenanga Investment Bank Bhd (Kenanga IB) echoed similar sentiments, noting that U.S. employment figures will be a primary focus. They forecast job openings at 7.3 million and payroll additions of 60,000 for August, compared to the previous month’s decline of 23,000.

According to Kenanga IB, speeches from Federal Reserve officials—including former Chair Kevin Warsh’s appearance at the Jackson Hole symposium—will serve as near-term catalysts, with upcoming labor statistics shaping expectations ahead of the FOMC meeting scheduled for September 15–16.

“In addition, markets are keeping a close eye on geopolitical developments between the U.S. and Iran, especially reports suggesting Iran might consider reopening the Strait of Hormuz, potentially easing concerns over oil supply disruptions,” the firm added.

Kenanga IB expects BNM to sustain the OPR at 2.75%, thereby allowing external factors such as global interest rate trends and USD positioning to drive ringgit movements.

“Our outlook suggests the Fed is more likely to pause in September, with our first rate cut expected in Q2 2027. Currently, 34% pricing indicates a possible September hike, with December fully accounted for in market expectations.”

“A softer-than-expected NFP figure increases the likelihood of a retest near 4.020, whereas stronger data or ambiguous signals from Warsh could push USD/MYR toward 4.050, despite early signs of recovery from oversold territory,” they explained.

Over the past week, the ringgit strengthened against the U.S. dollar, closing at 4.0230/0270 on Friday—improving from 4.0365/0405 the previous week.

The local currency also performed positively against other major currencies. Notably, it appreciated against the British pound to 5.4632/4687 from 5.5118/5173, while gaining ground versus the Japanese yen to 2.5193/5219 from 2.5449/5476.

Additionally, the ringgit rose against the euro to 4.6828/6874, up from 4.7227/7274, and saw gains across ASEAN peers.

It climbed versus the Philippine peso to 6.46/6.47 from 6.54/6.55, advanced against the Singapore dollar to 3.1652/1686 from 3.1809/1843, improved against the Indonesian rupiah to 227.3/227.7 from 228.1/228.4, and gained traction against the Thai baht to 12.2087/2253 from 12.3474/3638.

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