MUFG expects USD/MYR to keep trending lower, with a target of 3.7000 by end-2026. It links this view to a longer phase of ringgit strength, supported by structural factors. Malaysia is in an ICT-led investment upswing. Total approved investments in manufacturing and services rose 14.7% year-on-year in 9M25. ICT was the biggest contributor, with ICT investment approvals up about 32% year-on-year over the same period. Inflation is seen as under control, despite changes to RON95 fuel subsidies and adjustments to the sales and services tax. Bank Negara Malaysia is expected to keep its policy rate at 2.75% through 2026. Rate gaps should also narrow as US policy becomes less restrictive. Net foreign inflows into Malaysian bonds have been increasing since 2024. Supportive external factors include firmer commodity prices, strong demand for electronics, and a steady Chinese yuan. Key risks include a sharp slowdown in global growth, weaker commodity prices, or a downturn in the global electronics cycle. The article also notes it was produced using an AI tool and reviewed by an editor. We expect USD/MYR to continue falling, with a year-end target of 3.7000. This is based on the view that a durable ringgit appreciation cycle has started. The setup looks attractive for positioning over the coming weeks. For traders who want to express this view, buying USD put options with three- to six-month maturities is a practical approach. This strategy benefits if USD/MYR falls, while limiting losses if the market moves the other way. Given the steady downtrend, traders can initiate these positions now to capture the expected move. This view is supported by Malaysia’s ICT-led investment cycle, which strengthened through 2025. Full-year 2025 data from the Malaysian Investment Development Authority (MIDA) showed a 15% year-on-year rise in total approved investments. Foreign direct investment into the tech sector remains a key driver. Macroeconomic stability also supports a stronger ringgit. Inflation in January 2026 was 2.1%, suggesting the subsidy changes from last year were absorbed without major strain. This gives Bank Negara Malaysia room to keep rates steady, helping preserve the ringgit’s yield advantage. That stability is showing up in capital flows. BNM data for January 2026 reported another month of solid net foreign inflows into the local bond market, extending a positive trend that began in 2024. Ongoing demand for Malaysian debt directly supports the currency. External conditions also look helpful, especially for electronics. Industry reports for January 2026 showed global semiconductor sales up 8% year-on-year. This supports Malaysia’s export-heavy economy and adds to the case for ringgit strength. Even traders who are long USD/MYR should pay attention to downside risk. The fundamentals are strong enough that hedging a potential drop in USD/MYR makes sense. Buying out-of-the-money puts can be a relatively low-cost way to protect against faster-than-expected ringgit gains.

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