Ringgit opens higher on expectations of OPR normalisation

The Malaysian ringgit started the trading day on a positive note on Monday, buoyed by anticipations of a potential overnight policy rate (OPR) normalization ahead of Bank Negara Malaysia's Monetary Policy Committee (MPC) meeting scheduled for Thursday. By 8 am, the local currency was marginally stronger at 4.0550/4.0635 against the US dollar, up from last Friday's close of 4.0555/4.0600.

Afzanizam Rashid, the chief economist at Bank Muamalat Malaysia Bhd, suggested that the MPC members might consider a 25 basis point (bps) increase in the OPR. Rashid noted that the pre-emptive rate cut in July 2025, which reduced the OPR from 3% to 2.75%, had served its purpose, as the anticipated economic slowdown following the tariff shock did not manifest.

GDP growth in 2025 stood at 5.2%, while it accelerated to 5.5% in the first nine months of 2026. This reassures the case for OPR normalization, as concerns about slower growth have not materialized. However, Rashid also maintained that market expectations were that the benchmark interest rate would stay unchanged at 2.75%. Regarding external factors, currency markets were anticipated to stay cautious in the lead-up to the United States midterm elections on Tuesday, particularly due to uncertainties surrounding the Middle East conflict.

The ringgit showed mixed performance against major currencies, gaining against the British pound, euro, and Japanese yen, while remaining relatively stable against its ASEAN counterparts. It climbed against the Singapore dollar, advanced against the Thai baht, and was flat against the Indonesian rupiah and the Philippine peso compared to last Friday's closing rates.