Ringgit’s outperformance is expected to extend into next year as AI strengthens

[SINGAPORE] The Malaysian ringgit has outperformed its Asian counterpart for the second year in a row, and some strategists expect the outperformance to continue into 2026.

Strategists said Malaysia's deep ties to global technology supply chains, positive growth prospects and the government's continued push for fiscal consolidation bode well for the ringgit. Central bank policy is expected to stabilize next year, providing further support.

Strategists at Bank of Singapore and Mitsubishi UFJ Bank expect the ringgit to hover around 4.00 per dollar by the end of next year. Goldman Sachs expects the currency to rise to $3.95, a seven-year high.

“The ringgit is likely to continue gaining strength next year, supported by robust tech exports driven by surging demand for artificial intelligence (AI) and increased foreign direct investment flows, particularly into data centres,” said Moe Siong Sim, foreign exchange strategist at Bank of Singapore.

The ringgit has appreciated more than 9% against the US dollar this year, making it Asia's best-performing currency. The dollar opened largely unchanged on Monday at 4.0982, after rising twice.

Malaysia has emerged as a hub for data center construction in the region, creating new growth opportunities for the economy. Data center export services soared to RM10.7 billion (S$3.4 billion) in the first nine months of this year, from RM1.2 billion in the same period in 2024, the central bank said.

Goldman Sachs strategists said Bank Negara Malaysia is also unlikely to ease further policy despite the US Federal Reserve hinting at another rate cut in 2026, contributing to the narrowing of the yield spread.

“The ringgit is significantly undervalued according to our currency valuation model,” Goldman Sachs strategists including Danny Suwanapurthi said in a note. The consensus remains bullish on the ringgit.

Technical indicators are showing good signs. The USD-Ringgit pair broke through the September 2024 low support level at 4.0947, paving the way for the key 4.00 level. Further impetus could be provided if Malaysia's trade figures, to be released on December 19, confirm the continued strength of the country's high-tech exports.

“The ringgit's strength this year has been supported by a combination of domestic economic resilience and easing of external pressures,” said Lloyd Chan, foreign exchange strategist at Bank of Mitsubishi UFJ. “These supportive factors will continue until 2026, so we remain positive on the outlook for the ringgit.”Bloomberg