Malaysian Ringgit: Market Expects BNM to Hold Policy Path – DBS

DBS Group strategists Taimur Baig and Nathan Chan released a preview noting that Bank Negara Malaysia is expected to keep the overnight policy rate at 2.75% at its monetary policy meeting on September 3. This view is based on the central bank's wait-and-see stance following its rate cut in July 2025, indicating that its prudent policy path is likely to continue.

**Macro fundamentals provide support**

DBS economist Chua Han Teng believes that despite ongoing geopolitical risks in the Middle East, Malaysia's financial markets continue to reflect confidence in the country's solid domestic fundamentals. Robust macroeconomic conditions and capital inflows are underpinning the ringgit and the benchmark stock index. This backdrop reinforces the case for the central bank to refrain from further rate adjustments for now, allowing it to assess the effects of earlier easing measures.

**Structural characteristics of the ringgit**

Beyond economic factors, the ringgit's exchange rate is also highly correlated with international commodity prices. As an exporter of agricultural products, minerals, and oil, Malaysia's currency volatility is relatively pronounced among ASEAN nations. Additionally, Bank Negara Malaysia imposes relatively strict controls on the ringgit, which is a non-deliverable currency offshore; offshore institutions must meet specific conditions before engaging in related foreign exchange activities, which to some extent increases the difficulty of short-term speculative capital flows.

**Policy path outlook**

DBS Group strategists' latest forecasts suggest that following the July rate cut, the central bank's policy focus may shift toward maintaining stability. Given the current macro environment's support for the ringgit and the central bank's attention to capital flows and exchange rate stability, market participants widely expect the September meeting to serve as a "hold steady" observation window.