By Harizah Hanim Mohamed and Danni Haizal Danial Donald
KUALA LUMPUR, Jan 23 (Bernama) – The MADANI Government’s bold measures to reinforce the economy has proven to be a positive reset, culminating in the ringgit breaking through the psychological barrier of 4.0 versus the US dollar and reaching a more than seven-year high of 3.99 in intra-day trading.
Financial reforms coupled with structural adjustments and policy recalibration have borne fruit, translating into growth, confidence and capital inflows.
Even more, today’s superlative performance by the ringgit showed that the currency’s strength was not dependent of US Federal Reserve rate cuts but bolstered by domestic fundamentals.
This was a clear reflection of the steady investor confidence in the Malaysian currency as well as the overall economy buoyed by the move to maintain the Overnight Policy Rate at 2.75 per cent, which means balanced support for domestic activity and price stability.
In cross trading, the ringgit also advanced against major and regional currencies.
Khazanah Research Institute (KRI) chairman Nungsari Ahmad Radhi said Malaysia showed strong commitment by enacting laws such as the Fiscal Responsibility Act and rationalising various subsidy schemes to make them more efficient and targeted, while plugging leakages in many forms, including corruption and smuggling.
“We did some right things, some painful things that gave the market confidence in the economy and in the ringgit.
“We managed to contain inflation at low levels and the economy grew robustly despite external headwinds and uncertainties. We ended 2025 at almost five per cent growth, a very strong performance,” he told Bernama.
These measures have begun to translate into improved market performance, particularly in the currency market.
The ringgit touching the 3.99 level was last seen on June 18, 2018, at 3.9960/9990.
On a year-on-year basis, the ringgit appreciated by 9.85 per cent against the US dollar compared with 4.4420/4465 a year ago.
Apart from domestic reforms, external developments have also influenced the ringgit’s recent performance.
Looking at external factors, Nungsari said the downward pressure on the US dollar stemmed from policy uncertainty and rising debt levels in the United States.
“This has affected the outlook for the US dollar and, therefore, its demand. The rise in uncertainty has turned commodities such as gold into a preferred store of value, away from the US dollar, further reducing its demand,” he added.
Domestically, monetary policy and trade dynamics have further reinforced sentiment.
Muhammad Ridhuan Bos Abdullah, senior lecturer at Universiti Utara Malaysia’s (UUM) School of Economics, Finance and Banking, said the country’s trade balance is improving following Bank Negara Malaysia’s (BNM) maintenance of an expansionary monetary policy stance, noting that the stabilisation policy targeted by the central bank has had a significant impact on investor confidence in the cash market.
“Malaysian goods are relatively competitive as BNM’s monetary policy has supported exports, while imports have increased as foreigners stepped up purchases following the ringgit’s relative depreciation in the second half of last year,” he said.
He added that in the short term, a slight deficit emerged due to higher imports, but over the longer term, the trade balance is strengthening.
These trends are reflected in Malaysia’s latest trade performance.
Malaysia’s total trade in 2025 reached its highest value on record, surpassing the RM3 trillion mark at RM3.06 trillion, which represented a 6.3 per cent year-on-year increase, with exports exceeding imports to generate a RM151.80 billion trade surplus.
According to the Malaysia External Trade Development Corporation (MATRADE), the country’s exports exceeded RM1 trillion for the fifth consecutive year, rising 6.5 per cent to a record RM1.60 trillion, while imports grew 6.2 per cent to RM1.45 trillion.
From a broader policy perspective, structural and industrial measures have also begun to show traction.
Muhammad Ridhuan Bos said the MADANI Government’s fiscal policies, coupled with efforts to attract investors and promote Malaysian goods, have started to yield results.
“If we look at it from an industrial policy perspective, the MADANI Government’s strategy of strengthening the value chain is showing results,” he said.
Market strategists view these developments as validation of Malaysia’s broader economic trajectory.
IPPFA Sdn Bhd director of investment strategy and country economist Mohd Sedek Jantan said this validates that the country’s economic engine remains firmly in expansion mode, alongside its 2025 gross domestic product growth of 4.9 per cent.
“The ringgit’s move below RM4.00 against the US dollar today, its strongest level in several years, marked an important inflection point for Malaysia’s currency narrative.
“The speed of this move — faster than we had anticipated — is telling. It suggests that markets are no longer waiting for proof of reform, but are actively pricing in the reality that Malaysia’s structural adjustments and policy recalibration have begun to materially translate into growth, confidence and capital inflows,” he said.
Mohd Sedek said significantly, the ringgit’s strength is no longer driven by expectations of US Federal Reserve rate cuts, but is increasingly anchored in domestic fundamentals.
He said clear and consistent policy direction from the government has reduced uncertainty and strengthened medium-term visibility, while stable monetary policy has reinforced macroeconomic credibility.
“At the same time, rising demand from foreign investors for Malaysian equities and ringgit-denominated bonds has become a key driver. These inflows are largely institutional and allocation-driven, particularly into the bond market, generating sustained underlying demand for the currency.
“Higher trading volumes also reflect genuine economic and financial activity — supported by foreign direct investment, domestic lending expansion and more active hedging — rather than short-term speculative positioning,” he said.
Going forward, Mohd Sedek expects the ringgit to continue strengthening, supported by firmer private consumption, tourism-related inflows under the Visit Malaysia initiatives, and renewed interest from global fund managers seeking exposure to economies with policy clarity and growth resilience.
“More importantly, Malaysia now operates within a coherent and credible economic policy structure, anchored by the New Industrial Master Plan 2030, the 13th Malaysia Plan and the government’s increasingly pragmatic geoeconomics hedging strategy to navigate global trade policy uncertainty.
“Taken together, these factors suggest that the ringgit’s current strength reflects a structural re-rating rather than a cyclical currency swing — a narrative that business and economic audiences should take seriously,” he said.
-- BERNAMA
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