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MALAYSIA should resist becoming fixated on whether the ringgit breaches the 3.80 level against the US dollar and instead concentrate on the currency’s underlying strength as a reflection of broader economic fundamentals, according to leading economists.
Bank Muamalat Malaysia Bhd Chief Economist Dr Mohd Afzanizam Abdul Rashid said that while markets are speculating the ringgit could test the 3.80 psychological threshold and trade between 3.78 and 3.80, such milestones should not distract from deeper structural considerations.
“Long-term currency strength ultimately reflects structural competitiveness, policy consistency and governance quality,” he said.
Although he acknowledged that the ringgit could move towards 3.80, he cautioned against assuming a straight-line appreciation.
“Can it go to RM3.80? I suppose it can, but we have to remember the exchange rate never moves in a linear fashion,” he said, noting that external volatility and global currency dynamics make the timing of any breakthrough uncertain.
The local currency ended firmer at 3.8865/8925 against the greenback on Thursday, compared with 3.8900/8955 previously, supported by Malaysia’s improving economic outlook amid lingering uncertainty over US tariff policy and US–Iran negotiations.
Mohd Afzanizam pointed to historical precedent to underscore the ringgit’s potential. In the 1980s, the average USD/MYR rate stood at RM2.4386, while between 1990 and 1996 it averaged around RM2.6028. As recently as July 27, 2011, the ringgit traded at RM2.9390, remaining below RM3.00 that year.
“These data points demonstrate that the ringgit has historically strengthened beyond current levels,” he said, adding that the currency “has the potential to appreciate further going forward”, subject to both domestic reform momentum and global developments.
He stressed that exchange rate performance ultimately depends on the strength of the US dollar and Malaysia’s success in transforming its economy through consistent structural reforms.
“That requires the right policy and consistent implementation of those policies,” he said, highlighting political stability, strong governance and sustained reform momentum as essential to maintaining investor confidence.
Foreign ownership of Malaysian equities stood at 19.2 per cent in January 2026, down from 25.3 per cent in May 2013, suggesting scope for renewed capital inflows if policy credibility and economic fundamentals continue to improve.
He also described ongoing fiscal consolidation measures, including subsidy rationalisation under the government’s MADANI economic framework, as constructive signals of reform commitment.
“I opined that the ringgit has made a significant stride by becoming one of the best-performing currencies in Asia, and it is a reflection of market confidence after remaining in the doldrums for the longest time,” he said.
Mohd Afzanizam further concurred with the new 15 per cent tariff schedule announced by former US president Donald Trump following a court decision on Feb 20, 2026, which struck down earlier tariffs imposed under the International Emergency Economic Powers Act.
He said the revised structure could prove more favourable to emerging markets than developed economies.
Nazmi Idrus, head of economics at CGS International Securities, similarly argued that sustained appreciation would hinge on reform credibility and a softer US dollar environment, though he cautioned that forecasting precise currency movements remains fraught with uncertainty.
“Our projection is USD/MYR rate at 4.0 by year-end, and this is because the ringgit is too strong too fast, with risks including potential election developments and structural issues such as weak consumption and uncompetitive sectors,” he said.
Nazmi added that improvements in Malaysia’s macroeconomic narrative and investor perception would drive any sustained move below 3.80, rather than the exchange rate level itself acting as a catalyst.
The 3.80 mark carries deep psychological weight in Malaysia. On September 2, 1998, at the height of the Asian Financial Crisis, the government pegged the ringgit at 3.80 to the US dollar and imposed capital controls to shield the economy from speculative attacks and destabilising capital flows, after the currency had plunged to around RM5.00.
Regional currencies such as the Thai baht and Indonesian rupiah were similarly battered.
The peg drew sharp criticism from the International Monetary Fund, which argued that exchange rates should be market-determined, though it later acknowledged that the measures proved effective, if unconventional, in stabilising the currency.
The fixed rate remained in place for nearly seven years until July 21, 2005, when Malaysia shifted to a managed float regime, allowing the ringgit to fluctuate within a controlled band against a basket of currencies.
Before the crisis, the ringgit had traded at approximately 2.42 to the US dollar — a reminder, economists say, that exchange rate levels are ultimately shaped by structural strength rather than symbolic thresholds. - February 27, 2026