KUALA LUMPUR, Aug 10 — Kenanga Investment Bank Bhd (Kenanga IB) expects the ringgit to stabilise by end-August as the US dollar gives back some of its earlier gains following the US Federal Reserve’s (Fed) decision to keep interest rates unchanged at its July meeting.
In its economic viewpoint, the investment bank said the local currency extended June’s losses, depreciating a further 0.3 per cent in July to average 4.08 against the greenback (June: 4.07 per US dollar).
“It traded largely within our projected 4.07-4.10 versus the US dollar range.
“Elevated West Asia tensions and higher energy prices supported the US dollar, while softer US inflation and labour market data tempered expectations of further Fed tightening,” it said.
On regional currencies, Kenanga IB said all Asean-5 currencies weakened against the US dollar as the US dollar index rose to 100.9 in July (June: 100.3).
The Thai baht fell the most (-1.8 per cent), followed by the Philippine peso (-0.7 per cent), Indonesian rupiah (-0.6 per cent), the Malaysian ringgit (-0.3 per cent) and Singapore dollar (-0.2 per cent).
Renewed geopolitical tensions and higher energy prices sustained safe-haven demand for the US dollar, while softer US inflation and expectations of an extended Fed pause tempered broader US currency strength towards month-end.
Meanwhile, Kenanga IB said Bank Negara Malaysia (BNM) international reserves fell by US$0.5 billion to US$132.1 billion as at July 31, 2026, marking the first decline in four months.
It said the decline was driven mainly by lower foreign exchange (FX) reserves.
The foreign currency reserves fell by US$0.4 billion to US$116.8 billion, likely reflecting sizeable foreign outflows from the domestic bond market.
Concurrently, net FX reserves declined to US$81.3 billion in June (May: US$83.4 billion), mainly due to a sharp increase in short positions (-US$27.2 billion); holdings of other reserve assets declined by US$0.1 billion to US$2.2 billion, while gold, special drawing rights and the IMF reserve position remained broadly unchanged.
On the monetary policy outlook, Kenanga IB expects BNM to maintain the overnight policy rate (OPR) at 2.75 per cent through 2026 as underlying inflation stays contained and growth remains resilient.
“Higher Producer Price Index warrants close monitoring for signs of pass-through into Consumer Price Index, but we expect any cost pressures to remain manageable.
“Unless broader second-round inflationary pressures emerge, BNM is likely to look through temporary supply-driven shocks and prioritise policy stability,” it added. — Bernama
Date: 10 August, 2026 11:05 am
Source: Malay Mail
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