The Malaysian ringgit has recently become the best-performing currency in the world, beating both gold and the Thai baht in terms of gains against the US dollar. According to MUFG Bank senior analyst Lloyd Chan, the ringgit’s performance over the past three months has been impressive.
Using data from Bloomberg, Chan shared that from 27 June to 27 September, the ringgit strengthened by 14.35% against the US dollar. In comparison, gold only increased by 14.2%, while the Thai baht rose by 13.79%. The Japanese yen came in after with a 13.04% increase.
Chan explained that the ringgit’s strong recovery is due to Malaysia’s stable economic growth and the ongoing interest rate cuts by the US Federal Reserve (FED). He mentioned that expectations for more US rate cuts have significantly helped the ringgit’s rally, especially in the second half of this year.
“The ringgit was considered ‘cheap’ earlier in the year, which gave it room to rise as the FED started lowering interest rates,” Chan said. He also predicted that the ringgit could reach a five-year high of RM4 to USD1 by the end of the year, provided the market continues to favour Asian currencies and the FED maintains its 0.5% rate cuts.
However, Chan also cautioned that the upcoming US presidential election might create some uncertainty in the market, which could affect the ringgit’s performance.
On top of this, BMI Country Risk & Industry Research, a research company under Fitch Solutions, predicted that the ringgit could appreciate by another 9% in 2025, possibly reaching RM3.55 per US dollar by the end of that year. On 27 September, the firm had already revised its forecast for the ringgit in 2024, expecting it to hit RM4 per US dollar, an improvement from their earlier estimate of RM4.55.
Despite concerns that a stronger ringgit could affect exports, Yun Liu, an ASEAN economist with HSBC, is confident that Malaysia’s diversified economy can continue to grow. Malaysia has already recorded a 5.1% GDP growth in the first half of the year, which Liu attributes to strong foreign investments, particularly from China, and a stable political environment.
In an interview with CNBC International News on 30 September, Liu noted that Malaysia is receiving large foreign direct investment (FDI) into key sectors like semiconductors and green energy. She mentioned that Penang, as the hub of Malaysia’s semiconductor industry, continues to attract significant FDI.
“There’s still strong momentum in the semiconductor sector, with consistent FDI into Penang. We’re also seeing a lot of Chinese investments in the green energy sector, which shows how well-diversified Malaysia’s economy is,” Liu said.
With a stable economic base and growing investments, Malaysia is in a good position to handle any challenges that may arise in the global market.
