Current market bias: The MYR is slightly bullish against the HKD.
Key drivers include the interest rate differential, as Malaysia's positive economic outlook, driven by robust GDP growth and fiscal reforms, positions the MYR favorably. The Federal Reserve's anticipated interest rate cuts could further strengthen the MYR by narrowing the gap with US rates. Additionally, Malaysia is benefiting from improved fiscal conditions, with a narrowing deficit and increased foreign investment.
The MYR to HKD exchange rate is currently near 90-day highs, trading 2.4% above its 3-month average, suggesting it may remain in a stable range for the next few months.
An upside risk to the MYR could emerge from sustained foreign investment in Malaysian assets, while a downside risk may arise from volatility in oil prices, as recent data show oil trading at 7-day lows, which may weaken demand for the MYR.