KUALA LUMPUR — Bank Negara Malaysia’s (BNM) international reserves rose by US$0.9 billion in May 2025, lifted by sustained foreign capital inflows, with ringgit reserves reaching a nine-month high, said Kenanga Investment Bank (IB) Bhd.
In a statement, the investment bank said the central bank’s reserves stood at US$119.6 billion as at May 30, 2025, up 0.8 per cent month-on-month (m-o-m).
“Reserves remained sufficient to cover 5.0 months of imports. The reserves-to-short-term external debt ratio stayed at 0.9,” it said.
Kenanga IB said the increase was once again driven by a buildup in foreign exchange (FX) reserves.
“FX reserves climbed US$0.9 billion (+0.8 per cent m-o-m) to US$106.4 billion, supported by continued net inflows into Malaysian assets. Notably, BNM’s net FX reserves edged up to US$67.4 billion in April (March: US$65.6 billion) as short positions fell to a 14-month low.
“Other reserve assets edged up by US$0.03 billion (+1.2 per cent m-o-m), while gold, International Monetary Fund reserve position and Special Drawing Rights were broadly unchanged,” it said.
In ringgit terms, Kenanga IB said the reserves rose by RM3.7 billion (+0.7 per cent m-o-m) to RM530.0 billion in May, the highest since August 2024.
“The ringgit strengthened markedly in May, trading within a 4.20 to 4.32 range per US dollar and averaging 4.27 (April: 4.41).
“This was driven by strong portfolio inflows in May (RM14.4 billion; April: RM8.3 billion), as foreign investors moved to reduce US dollar exposure amid shifting global risks,” it said.
Kenanga IB added that tentative progress in US-China trade ties and a more conciliatory tone from US President Donald Trump towards the European Union helped stabilise the US Dollar Index (DXY).
“However, persistent US fiscal concerns kept the risk premium on US assets elevated, weighing on the US dollar and lifting emerging market currencies,” it said.
Kenanga IB said BNM is likely to hold policy steady in the near term, backed by stable macroeconomic fundamentals.
“Although the consensus is increasingly tilting towards two rate cuts in 2H 2025, we expect BNM to keep the Overnight Policy Rate (OPR) unchanged at 3.00 per cent for now.
“Core inflation has stayed above its 1.8 per cent long-term average over the past three months, pointing to steady domestic demand despite lower headline inflation,” it said.
It noted that gross domestic product (GDP) growth eased to 4.4 per cent in the first quarter of 2025 (4Q 2024: 4.9 per cent), but March data showed a robust 6.0 per cent year-on-year expansion, indicating underlying strength.
“That said, we remain cautiously optimistic for 2H 2025, although ongoing trade tensions remain a risk.
“Recent signs of de-escalation, especially between the US and China, may limit downside risks,” it said.
Kenanga IB maintained its year-end US dollar-ringgit forecast at 4.08 (2024: 4.47).
“The ringgit’s outlook is supported by data showing a US$37.0 billion net divestment from US equities by foreign investors in May, reinforcing the broader de-dollarisation thesis.
“While trade policy uncertainty remains a risk, Malaysia’s macroeconomic resilience and renewed foreign interest in local assets support a constructive view on the ringgit,” it added. — June 11, 2025