KUALA LUMPUR: The ringgit could hold its resilience and trade around 4.27 against the US dollar this year if the United States Federal Reserve (Fed) refrains from sharp rate cuts.

In the immediate term, the local note could trade between 4.20 and 4.25 next week, largely due to expectations of US rate cuts.

AmBank (M) Bhd chief economist Firdaos Rosli said the ringgit was among the top-performing currencies in the first half of 2025.

The positive momentum is expected to persist.

He said the year-end forecast of 4.27 reflects expectations of a mild rebound in US dollar strength and softer support from Malaysia's trade account.

Firdaos expects the ringgit to trade within the 4.20-4.25 band in the near term, largely influenced by US dollar-driven factors.

This outlook comes despite limited market reaction to recent developments, including the US tariff deal, the potential semiconductor tariff threat, and Bank Negara Malaysia's downward revision of the country's growth outlook.

"Malaysia's stable monetary policy, coupled with minimal surprises on the domestic fiscal or political front, supports a steady outlook for the ringgit," he said at AmBank's macroeconomic outlook briefing here today.

He added that robust foreign exchange trading volumes, seen when the US dollar/ringgit briefly dipped below 4.20 during intraday trade on Aug 14, further reinforced AmBank's conviction of a narrow trading range in the near term.

He noted that the US dollar/ringgit traded within two distinct bands in the first half of 2025, initially between 4.40 and 4.50 before strengthening to the 4.20-4.30 range from May.

Firdaos expects further appreciation of the ringgit in the first half of 2026.

This will ge driven by greater clarity on the Fed's rate trajectory, improved regional equity sentiment, and a narrowing short-term rate differential that could spur more dollar conversions into the ringgit.

"The effect may be tempered if potential semiconductor tariffs erode Malaysia's strong current account surplus. However, Bank Negara's larger foreign reserves in 2025 may help cushion the impact," he added.

Firdaos highlighted upside risks to the forecast, including a sharp escalation in US-China tensions, faster-than-expected US inflation, or a more hawkish stance by the incoming Federal Reserve chairman, whose appointment is still pending.

He added further weakness in the US labour market, renewed concerns over US fiscal health, or questions about the Fed's independence could trigger a broad-based rally in Asian currencies against the dollar.

Meanwhile, Kenanga Research said the ringgit-dollar pair was traded between 4.21-4.24 this week, lifted early on by rising expectations of the Fed rate cuts after its chair Jerome Powell's dovish tilt last Friday.

It expects the ringgit to test 4.20 next week, with Bank Negara likely to keep rates steady at the next Monetary Policy Committee meeting on Sept 4.

"President Donald Trump's continued attacks on the Fed risk undermining its independence and are likely to keep US dollar sentiment fragile until Powell's departure next year," it said.