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THE ringgit is showing signs of sustained strength, reaching a five-year high of 4.045 against the U.S. dollar, up from 4.064 the previous day, marking gains not seen since March 2021.
Year-to-date, the currency has appreciated 9.4 per cent against the greenback, outperforming regional peers such as the Singapore dollar, which rose 3.8 per cent, and the Thai baht at 0.05 per cent.
Market analysts attribute the ringgit’s resilience to a combination of stronger domestic fundamentals, closer integration with Asia, and a supportive US monetary outlook.
Mohd Sedek Jantan, director of investment strategy and country economist at IPPFA Sdn Bhd, said, “The ringgit's 2025 performance has already exceeded IPPFA's in-house estimate of 4.15 per US dollar, with the 2026 projection currently at 4.05.
“This target may be revised by the end of March 2026, after the full-year 2025 GDP figures are released, the US Federal Reserve meeting takes place and early market movements provide a clearer gauge of economic activity.”
Sedek explained that the currency’s gains also reflect structural improvements in Malaysia’s external accounts, including a widening goods surplus, stabilising tourism receipts, and more predictable income outflows.
“Fiscal signalling has improved significantly, thanks to clearer consolidation pathways and more credible medium-term revenue reforms.
“This combination has lowered Malaysia's external financing risk premium, which is why the ringgit has been able to rally even without aggressive domestic rate hikes,” he added.
Despite the optimism, Sedek cautioned that the ringgit remains exposed to external shocks.
“A spike in US Treasury yields, a correction in global equities, or a shock in credit markets could put emerging market currencies under pressure. Commodity volatility, particularly in energy and palm oil, and shifts in global capital flows are additional risks,” he said.
Domestically, monetary and fiscal policy credibility remains a key anchor for investor confidence. Bank Negara Malaysia’s decision to maintain the overnight policy rate at 2.75 per cent while keeping inflation contained reinforces monetary predictability.
Sedek also highlighted reforms such as digital taxation, carbon pricing, and a modernised consumption tax framework as critical measures to sustain investor confidence without resorting to growth-dampening austerity.
Regional dynamics also favour the ringgit, given that nearly 70 per cent of Malaysia's trade is within Asia.
Sedek observed, “If China's stabilisation continues and ASEAN trade remains resilient, regional risk appetite will support currencies like the ringgit.
“Normalisation of Japanese policy also tends to benefit fundamentally strong Asian currencies, including the ringgit. The currency is no longer being driven purely by the dollar cycle but by Malaysia's reintegration into a more Asia-centred growth and capital flow system.”
Public Investment Bank Bhd head of research Eltricia Foong echoed the positive outlook, citing expectations that the US Fed will maintain an accommodative stance in 2026, potentially including interest rate cuts and renewed quantitative easing.
“While we forecast the ringgit to strengthen to RM4.00–4.05, there is upside risk of it rising below RM4.00 to the US dollar towards the second half of 2026. This could benefit raw material importers such as consumer players, lowering their translated cost of goods and boosting profit margins,” she said.
Kenanga Research maintains its end-2025 projection of 4.08 and forecasts a medium-term target of 3.95 for end-2026, reflecting continued confidence in the ringgit’s outlook.
The firm highlighted sustained foreign inflows into Malaysian bonds, exporters’ repatriation, and stable foreign currency deposits as supporting factors.
“A 10 per cent reduction in these deposits could lift the ringgit by roughly 3.0 per cent against the US dollar. The ringgit continues to benefit from Malaysia's stable macro backdrop, ongoing structural reforms and selective investor flows as global uncertainty lifts US Treasury term premia.
While the real yield differential versus the US remains modest, Malaysia offers one of the most attractive risk-adjusted carry profiles in emerging Asia,” the research note said. - December 25, 2025