THE current appreciation of the ringgit against the US dollar, and against our bete noir the Singapore dollar, is greeted with much enthusiasm. Yes, it’s the highest in a couple of years, after what was to be a prolonged dour period for the local unit.
Nevertheless, there was surprisingly muted approval largely from the folks who had blamed the government when the ringgit was at its lows a couple of years ago, but were now ironically loath to give it any credit when the reverse happened. Come on, be fair, man.
Of course much of the ringgit’s poor performance then was due to external factors beyond our control, but that did not stop the depreciating currency to be used as the hammer to beat the government with. In October two years ago, some folks were singing the dirge on the local unit, when it was at the lows of almost RM4.80 against the greenback, or at about RM3.50 to the Sing dollar. It was a downer that hurt our pride, mostly, and the government was at fault, some alleged.
At the time of this writing, the ringgit was at RM4.12 against the US unit and RM 3.17 against the Sing dollar, appreciating by 14 per cent and 10 per cent respectively.
There are many reasons for the appreciation, and some of them yet again are beyond our control, such as the general weakness of the US dollar these days. This followed a couple of years of rapid rise of the greenback, largely due to an extraordinary high interest rates regime employed by the Federal Reserves – it raised rates 11 times over the period to stem inflation.
The higher US interest rates then made owning dollars or dollar-based assets a good idea for they were yielding higher returns. This led to a heightened global demand for the US dollar and raised its value vis a vis most currencies, including the ringgit.
However, right now there is a desire in the US for a lower interest rate regime to boost its domestic economy. At the same time there is also an inclination from our Bank Negara to keep its policy rate steady, hence narrowing the interest gap with the US. This offers less incentive to sell the ringgit for the dollar, for instance.
And despite the skepticism of some, the market has concluded that a stronger than expected economic performance for the rest of the year is forthcoming. The market is also positive on the fiscal consolidation effort, including reducing the national debt. The national current account position is also positive, registering a surplus that suggests that we are selling more than we buy.
These are some of the economic fundamentals that lend to the ringgit’s positive trend – some good news is likely to bring the market around.
Incidentally, while many may feel good about the stronger ringgit, perhaps looking at the possibility of cheaper imports or dreaming of a holiday abroad, not everyone is rejoicing over the strong showing of the local unit.
One cannot help but be concerned that such rapid and strong advances carry with it risk, too. Such strong performance in a short period will likely lead to some sudden correction, before the ringgit settles to a market determined level.
Also, as one of the top 25 trading nations, our exports can be more expensive and less competitive. Billion ringgit worth in Inbound tourism can also be affected by the more expensive ringgit when tourists are looking for value for money destinations.
Our electrical and electronics exports, oil and gas, and commodities like palm oil are mostly transacted in US dollars, and soon we should see some companies reporting foreign exchange translation losses that will affect their bottom lines.
A stronger ringgit may also have an impact on Malaysia as an investment destination, as foreign multinationals may see their margins squeezed, and this can ultimately have a longer term impact on the economy.
The fate of the ringgit, unless we decide to re-peg it again, is seldom entirely in our hands. We have to endure the swings and roundabouts of the currency market, not to over react, and to use it to the best of our ability.
It is hard, but we should not be too excited by the rise of the local unit, nor be too down when it tests its lows. – November 15, 2025
***Datuk Zainul Arifin is the Chief Executive Officer of Big Boom Media which publishes Scoop.my