Malaysian Ringgit: Stable range against US Dollar with hawkish BNM bias – Commerzbank

Commerzbank’s Charlie Lay and Dr. Henry Hao highlight Malaysia’s strong September trade data, with exports and imports far exceeding expectations and the trade surplus widening further. Combined with subdued CPI and core inflation, this supports Bank Negara Malaysia’s hawkish bias while allowing flexibility on timing. The authors expect the Overnight Policy Rate to stay at 2.75% near term, with a possible hike in early 2027 and USD/MYR holding in a 4.00–4.10 range.

MYR supported by trade surplus

"The stronger-than-expected trade performance suggests upside risks to the advance Q3 GDP growth estimate of 5.3% yoy. It reinforces expectations that full-year growth could reach the upper end of the government's revised 4.8–5.3% forecast range. The economy expanded 5.6% in the first three quarters this year, implying around 2.5-4.5% growth in Q4 to hit the government’s full-year target."

"Headline inflation averaged just 1.8% in the first nine months, remaining comfortably within the government's 2026 forecast range of 1.5–2.5%. Looking ahead, inflation is projected to rise modestly to 1.8-2.8% in 2027, reflecting higher energy, food and other input costs. However, fuel subsidies, price controls and a relatively stable MYR should help contain the transmission of higher global commodity prices to consumer prices."

"In terms of implications for monetary policy, the combination of resilient economic growth and subdued inflation provides BNM with some flexibility over the timing and direction of its next policy adjustment. The strong export data supports an increasingly hawkish policy bias, but the softer inflation reading reduces the urgency for an immediate rate hike. Bank Negara Malaysia (BNM) kept the Overnight Policy Rate (OPR) at 2.75% in September but removed its previous description of the policy stance as "appropriate", signalling greater flexibility to adjust rates."

"Governor Abdul Rasheed Ghaffour subsequently indicated that BNM has room to act should inflation pressures intensify. We expect BNM to hold rates steady at its next meeting on 5 November. A 25bp hike to 3.00% in early 2027 is possible if growth remains resilient and inflationary pressures build. For MYR, supportive factors come from the combination of strong external demand and a substantial trade surplus. USD/MYR has been relatively stable between the 4.00-4.10 range since July."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)