BMI Ups Its End-2025 Ringgit Forecast To RM4.40 Per USD


Kuala Lumpur: BMI, a unit of Fitch Solutions, has revised its end-2025 forecast for the ringgit to RM4.40 per US dollar (USD) from RM4.50 previously. Over the medium term, it said the ringgit looks set to remain on a gradual appreciatory trend on the back of a robust growth outlook and sustained current account surplus.



According to BERNAMA News Agency, risks to the currency forecasts are skewed towards a weaker ringgit. A hawkish US Federal Reserve (Fed) poses upside risks to the US interest rate view, which could see it cut by 50-75 basis points (bps) less than the current forecast of 100bps and, in turn, leaves less scope for the ringgit to appreciate, BMI said in a research note.



BMI noted that from a technical perspective, the ringgit has depreciated by more than eight percent since touching trendline resistance at RM4.10 per USD level in early October 2024. Additionally, momentum indicators are starting to look oversold, which should lead to short-term appreciation and align with the forecast for the unit to trade between trendline support of RM4.80 and RM4.20 per USD by mid-2025.



The agency also expects interest rate differentials between the US and Malaysia to narrow in favor of the ringgit. At their December 2024 meeting, the Fed enacted a hawkish 25 bps cut to 4.50 percent, in line with BMI’s and consensus expectations. BMI anticipates that the Fed’s easing cycle has further to run and expects the Fed funds rate to touch 4.00 percent by the first half of 2025. In contrast, Bank Negara Malaysia is expected to leave its overnight policy rate on hold during the same period.



Beyond the six-month horizon, BMI foresees a slower appreciation in the ringgit, expecting it to strengthen marginally to RM4.30 per USD by the end of 2026. Their US team has revised their end-2025 and 2026 rate forecasts to 3.50 percent from 3.00 percent following Donald Trump’s victory in the US presidential elections. This will limit the ringgit’s appreciation, but other factors will support the ringgit.