KUALA LUMPUR, Dec 25 — With less than a week remaining before the close of 2025, the ringgit continued its upward momentum, trading around 4.04 against the US dollar, its highest level in nearly five years.

The currency’s performance reflects growing confidence among investors and traders in Malaysia’s economy.

Bank Muamalat Malaysia Bhd chief economist Mohd Afzanizam Abdul Rashid told Bernama the ringgit’s strength was evident not only against the US dollar but also relative to other regional currencies, including the Singapore dollar.

“Perhaps there has been a reassessment by traders and investors of the Malaysian economy and the reforms implemented, particularly fiscal consolidation. If such momentum continues, the ringgit could revert to its long-term average of RM3.82 (versus US dollar), a level last seen in July 2005,” he said.

IPPFA Sdn Bhd director of investment strategy and country economist Mohd Sedek Jantan said the ringgit’s rise to around 4.04 reflects a genuine improvement in Malaysia’s macroeconomic and balance-of-payments fundamentals, rather than a temporary bout of US dollar weakness.

“The external account has structurally strengthened, with a widening goods surplus, normalising tourism receipts, and stabilising income outflows. Meanwhile, clearer fiscal consolidation pathways and credible medium-term revenue reforms have lowered Malaysia’s external financing risk premium, allowing the ringgit to strengthen even without aggressive domestic rate hikes,” he added.

Mohd Sedek cautioned that sustainability does not imply immunity. The ringgit’s ability to test the 4.00 level by year-end will largely depend on global financial conditions rather than domestic factors alone.

“A sharp rise in US Treasury yields, renewed equity market volatility, or stress in global credit markets could tighten liquidity and pressure emerging market currencies regardless of fundamentals.

“Commodity price swings remain significant, given Malaysia’s exposure to energy and palm oil. The ringgit’s current rally is fundamentally grounded, but it remains sensitive to global risk dynamics,” he said.

He also noted MARC Ratings’ reaffirmation of Malaysia’s AAA rating with a stable outlook as a key domestic signal.

“Consistency across local and international ratings that Malaysia’s fiscal position, monetary framework, and financial system remain sound helps compress the country risk premium embedded in Malaysian assets. 

“This improves the stability of capital inflows into government bonds, sukuk and the currency market,” said Mohd Sedek.

Yesterday, MARC Ratings affirmed its unsolicited public information sovereign rating on Malaysia at AAA with a stable outlook, citing the country’s open and increasingly diversified economy, sound monetary policy, resilient financial sector, and ongoing structural and institutional reforms.

Looking ahead to 2026, Mohd Sedek said that if Malaysia maintains fiscal discipline, controls inflation, and preserves a strong external position, the ringgit could occasionally trade below the 4.00 level.

“Such moves would be driven not by speculative flows but by Malaysia’s reintegration into a more Asia-centred growth and capital flow system, supported by resilient regional trade, stable electronics exports, and intra-Asian investment flows,” he said.

Meanwhile, Juwai IQI Global chief economist Shan Saeed described the ringgit’s recovery as measured, recently firming toward 4.04 against the US dollar, underpinned by improving sovereign macroeconomic fundamentals and disciplined policy settings.

He said the ringgit’s outlook into 2026 is shaped less by cyclical swings and more by structural resilience.

“Supported by credible macro policy, steady growth, and sustained investment interest, Malaysia remains firmly on global investors’ radar as a stable Asean currency in an otherwise fragmented global environment.  "The ringgit continues to embody structural stability and reflects Malaysia’s macroeconomic fortitude,” he said.

Shan added that the ringgit has the potential to test the stronger end of the 3.90 handle against the US dollar over the medium term, contingent on global monetary easing and continued domestic policy credibility. — Bernama