Ringgit closes at a fresh 7-year high against the dollar
The Malaysian ringgit firmed to a fresh seven-year high against the U.S. dollar by the end of trading on Thursday, signaling renewed investor confidence in Malaysia’s economy and a shift in global dollar dynamics. At 6pm, the local currency traded at 3.9500/3.9555 per dollar, improving from yesterday’s close of 3.9615/3.9670. The closing level marks the strongest the ringgit has reached since it touched 3.9480 in May 2018, underscoring a broader reversal in risk appetite and a softer greenback in the domestic market.
What’s driving the move?
Market observers point to a combination of domestic resilience and external factors that are supporting the ringgit. A softer U.S. dollar, waiting game ahead of global central bank policy decisions, and hopeful signs from Malaysia’s trade and domestic demand are among the catalysts cited by analysts. The ringgit’s strength also reflects cautious optimism about, and potential relief from, persistent inflation and monetary policy expectations in major economies, which can reduce USD demand for non-dollar assets.
Analyst take
Afzanizam Rashid, chief economist at Bank Muamalat Malaysia Bhd, noted that the currency’s move aligns with a period of steady macro momentum for Malaysia. While he cautioned that currency moves can be volatile in the short term, he argued that the ringgit’s appreciation is a natural response to improving external balance and domestic growth indicators. The analyst also highlighted that the market is digesting a confluence of supportive factors, including stable exports and a controlled inflation path, which can sustain the currency’s gains in the near term.
Implications for Malaysia
A stronger ringgit could have a mixed impact on the Malaysian economy. On the positive side, import costs for commodities priced in dollars may ease, potentially easing consumer price pressures and broadening the space for monetary policy to consider a measured stance. For exporters, a firmer ringgit can erode margins if USD-denominated earnings translate into less ringgit revenue, though a robust external demand outlook and higher global commodity prices can offset some of that effect.
From an investment perspective, the currency rally may boost confidence among foreign investors, supporting a broader risk-on environment. However, traders are also watching for sustained inflows and how the central bank will respond to currency movements in the context of inflation targets and growth goals.
What to watch next
Market participants will be keen on upcoming economic releases and the central bank’s commentary on inflation and exchange rate policy. If the ringgit can hold the 3.95 per dollar level, it may set the stage for further gains, particularly if external conditions remain favorable and domestic data continue to show resilience. Conversely, if U.S. dollar strength returns or commodity prices become volatile, the ringgit could face renewed pressure.
In summary, Malaysia’s currency is enjoying a rare moment of strength against the dollar, driven by a mix of domestic steadiness and cooler dollar mood. Traders will be watching the next few sessions closely to see if the ringgit can sustain the momentum or if profits become a feature of a fluctuating forex landscape.
