After years of volatility and external headwinds, the Malaysian ringgit is finally showing signs of a sustained revival. Trading at RM3.9540 against the US dollar on January 27, 2026, the ringgit has climbed to levels last seen in May 2018 - a symbolic and psychological milestone that builds renewed confidence in Malaysia’s economic direction.
According to Bank Negara Malaysia (BNM) governor Datuk Seri Abdul Rasheed Ghaffour, this steady appreciation is no accident. It is the result of policy certainty, ongoing government reforms, and supportive global factors coming together at the right time.
Speaking to Bernama, Abdul Rasheed stressed that while external conditions such as global capital flows and interest rate differentials do matter, domestic factors remain the most critical drivers of the ringgit’s strength. Strengthening economic fundamentals, enhancing national competitiveness, and sustaining reform momentum are, in his words, “the drivers for the ringgit going forward.” When these elements align, Malaysia becomes a more attractive destination for investment - and the currency benefits accordingly.
The BNM governor drew a clear distinction between short-term and long-term influences on the ringgit. Short-term factors, such as portfolio flows and interest rate movements, can be fickle. Capital may enter today and exit tomorrow, depending on global risk sentiment. Interest rate differentials, too, may narrow or widen unpredictably. These variables can create temporary volatility but do not define the currency’s long-term trajectory.
What truly anchors the ringgit, Abdul Rasheed emphasised, are solid fundamentals. Malaysia’s economy is highly diversified, supported by a resilient banking sector, prudent domestic policies, and a strong external position. These structural strengths provide long-term support that cannot be easily undone by short-term market swings.
On the issue of central bank intervention, Abdul Rasheed was clear and consistent with BNM’s long-standing stance. The central bank does not set or target a specific level for the ringgit. Instead, its role is to ensure orderly market functioning and sufficient liquidity, regardless of whether the currency is strengthening or weakening. In other words, BNM acts as a stabiliser - not a price-setter.
Equally important is the government’s commitment to fiscal discipline and reform implementation. Abdul Rasheed highlighted measures such as targeted subsidies, which are being carefully planned and executed to avoid economic disruption. These reforms, combined with credible fiscal consolidation plans, are reinforcing investor confidence. Notably, Malaysia is on track to reduce its fiscal deficit to 3.5% of GDP in 2026, down from an estimated 3.8% last year - a signal of seriousness in restoring fiscal health.
Ultimately, the ringgit’s recent performance reflects more than just market optimism. It reflects a growing belief that Malaysia is regaining policy clarity, reform credibility, and economic direction. If these efforts remain consistent, the ringgit’s current strength may not just be a cyclical rebound - but the foundation of a more durable recovery.
By: Kpost
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