KUALA LUMPUR, Aug 17 — Kenanga Investment Bank Bhd (Kenanga IB) has retained its ringgit forecast of RM3.95 to the United States (US) dollar by year-end, underpinned by resilient growth, a sustained current account (CA) surplus, and record foreign-currency deposits.
The investment bank said it holds its constructive medium-term stance as the US dollar’s elevated level looks increasingly like a temporary risk-premium bump rather than a new trend.
It attributed the greenback’s strength to West Asia jitters and markets pushing out US Federal Reserve cuts while still pricing some chance of further hikes.
“The structural case for a weaker US dollar over time, supported by reserve diversification, still-wide US fiscal deficits and gradual portfolio reallocation, should reassert once the Fed moves from pause to actual easing,” Kenanga IB said in a research note today.
In the near term, the pause should keep the US dollar underpinned on rate differentials; the pivot to easing should then renew downward pressure.
It added that the ringgit’s nominal effective exchange rate fell 0.8 per cent in the second quarter of 2026 (2Q 2026) even as the US dollar/ringgit pair held broadly steady, highlighting some trade-weighted weakness.
“Still, resilient growth, a sustained CA surplus, and record foreign-currency deposits remain supportive, and we retain RM3.95 as the likelier outcome,” Kenanga IB said.
Meanwhile, Bank Negara Malaysia (BNM) is expected to hold the overnight policy rate (OPR) at 2.75 per cent through 2026.
“Inflation is contained enough to keep pre-emptive tightening off the table, though pipeline pressures warrant closer monitoring,” it said.
Headline inflation rose to 1.9 per cent in 2Q 2026 from 1.6 per cent in the first quarter (1Q), largely on a jump in fuel inflation to 5.0 per cent as RON97 and diesel prices moved higher, while core inflation eased to 1.9 per cent from 2.1 per cent in 1Q 2026.
Kenanga IB noted that while the 2Q 2026 gross domestic product (GDP) growth of 6.0 per cent remained above BNM’s 4.0-5.0 per cent 2026 guidance range, the central bank is expected to look through the current cost shock and preserve policy flexibility unless stronger growth or inflation pressures trigger persistent second-round effects.
Meanwhile, Apex Securities Bhd also expects the central bank to keep the OPR on hold at 2.75 per cent through 2026, saying BNM is likely to adopt a wait-and-see approach and assess the rising headwinds in the second half of 2026.
“Our 2026 baseline GDP growth forecast of 5.0 per cent and inflation forecast of 2.0 per cent also remain within BNM’s current projections,” it said.
However, with full-year GDP growth potentially reaching 5.1-5.5 per cent year-on-year, above BNM’s current forecast range, the stronger-than-expected performance in the first half of 2026 has raised the prospect of a rate hike.
