The ringgit has strengthened steadily in recent months, reaching levels last seen in 2018. Bank Negara Malaysia Governor Datuk Seri Abdul Rasheed Ghaffour said this reflects policy certainty, ongoing government reforms, and supportive global conditions, rather than short-term market movements alone.

At the lunch break on Tuesday, the ringgit traded at 3.9540 against the US dollar, matching its level from May 15, 2018. This followed a recent move below the 4.00 psychological level, extending the currency’s run of fresh highs.

Domestic Policy Remains The Key Driver

While both global and local factors influence currency movements, Abdul Rasheed said domestic fundamentals remain the main focus for sustaining the ringgit’s strength. These include strengthening economic foundations, improving competitiveness, and continuing reform measures that support long-term growth.

He noted that when these elements are aligned, Malaysia becomes more attractive to investors, encouraging capital inflows that support the currency over time. For households and businesses, a more stable ringgit can help reduce volatility in import prices and overseas costs.

Short-Term And Long-Term Factors Affect Currency Movements

The central bank views currency drivers in both short-term and long-term terms. Short-term factors include capital flows and interest rate differentials, which can change quickly as global conditions shift.

Interest rate gaps, for example, may narrow for a period before widening again. These movements can affect the ringgit in the short run, but they do not determine its longer-term direction.

Bank Negara Focuses On Orderly Market Conditions

Abdul Rasheed stressed that Bank Negara Malaysia does not target a specific level for the ringgit. Instead, the central bank’s role is to ensure orderly market conditions and sufficient liquidity, regardless of whether the currency is strengthening or weakening.

The exchange rate, he said, is determined by the market. This approach aims to reduce excessive volatility that could disrupt trade, investment decisions, and financial planning.

Strong Fundamentals Provide Long-Term Support

Malaysia’s solid economic fundamentals continue to underpin the ringgit. These include a stable banking sector, consistent domestic policies, and a diversified economy.

The country also plays a role in global supply chains, including in high-demand sectors such as electrical and electronic products linked to artificial intelligence. Strong external demand in these areas supports export earnings, which in turn help support the currency.

Productivity And Investment Quality Remain Important

Beyond growth figures, Abdul Rasheed highlighted productivity and efficiency as key factors in attracting high-quality investments. Such investments tend to create higher-income jobs and generate stronger spillover effects across the economy.

For workers and consumers, this can translate into better income prospects over time, supporting spending power and financial stability.

Fiscal Discipline Supports Market Confidence

The governor said reforms, including targeted subsidies, are being implemented in a measured way to avoid disrupting economic activity. The government’s commitment to fiscal discipline is also contributing to positive market sentiment.

Malaysia is on track to reduce its fiscal deficit to 3.5% of gross domestic product in 2026, down from an estimated 3.8% in the previous year. Clear fiscal targets can help reassure investors and support currency stability.

Economic Growth Momentum Remains Strong

Recent data points to continued economic momentum. Advance estimates from the Department of Statistics Malaysia project growth of 5.7% in the fourth quarter of 2025, up from 5.2% in the previous quarter.

This acceleration is supported by strong performance across key sectors and robust domestic demand, which helps reinforce confidence in the broader economy.

Global Conditions Currently Favour The Ringgit

Although external factors are beyond policymakers’ control, current global conditions are working in Malaysia’s favour. Narrowing interest rate differentials and easing financial conditions in advanced economies are providing near-term support for the ringgit.

Abdul Rasheed said the currency’s recent strength reflects a combination of domestic and external influences rather than any single factor. This mix of supportive conditions has helped lift the ringgit to levels not seen in several years, offering greater stability for trade, travel, and cross-border financial planning.

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