PETALING JAYA: Malaysia’s ringgit is navigating a challenging path in 2025, with a mix of global headwinds and domestic opportunities shaping its outlook while the currency remains under pressure due to persistent US dollar strength, rising US Treasury yields and trade-related vulnerabilities.
Maybank foreign exchange research head Saktiandi Supaat said the ringgit’s recovery hinges on two key factors – sustained investment momentum and eventual stabilisation of the US dollar.
“Malaysia’s domestic investment upcycle, particularly initiatives such as the Johor-Singapore Special Economic Zone, is expected to bolster sentiment towards the ringgit. These projects are driving optimism for long-term economic growth, with the government’s commitment to fiscal consolidation offering further support.
“Narrowing budget deficits and the potential for positive sovereign rating revisions could help anchor investor confidence, providing a counterbalance to external pressures,” he said at the Maybank Investment Bank 2025 Outlook virtual media briefing on Tuesday.
However, Saktiandi noted that Malaysia’s high export exposure to China remains a double-edged sword.
“The ringgit’s sensitivity to RMB (renminbi) fluctuations has been well-documented, with estimates showing a 0.6% to 0.7% impact on the ringgit for every 1% move in the RMB. This vulnerability is compounded by ongoing softness in the RMB, which is projected to weaken further against the dollar in 2025. As Malaysia’s second-largest export market, China’s economic trajectory will remain a critical factor in shaping the ringgit’s performance,” he said.
The broader strength of the US dollar poses another significant challenge, Saktiandi said, forecasting the ringgit-dollar exchange rate to peak at RM4.70 by mid-2025 before easing to around RM4.45 by year-end.
“This trajectory reflects global market dynamics, including elevated US Treasury yields and the Federal Reserve’s cautious stance on interest rates. Dollar strength is expected to remain a dominant theme through the second and third quarters of 2025, exerting downward pressure on the ringgit,” he added.
Saktiandi said Bank Negara Malaysia’s policy stability could provide some relief amid these headwinds. With the central bank maintaining its policy rate and refraining from aggressive easing, Malaysia’s yield differentials may remain relatively stable compared to regional peers.
“This stability is expected to limit the extent of ringgit depreciation, even as higher-yielding currencies like the Indonesian rupiah and Philippine peso face risks of rate cuts.”
Saktiandi said that while the ringgit faces undeniable external challenges, Malaysia’s improving fiscal position and strong investment narrative offer a foundation for resilience.
“The interplay between global macroeconomic forces and domestic policy measures will determine whether the currency can recover meaningfully in the second half of 2025. For now, market participants are keeping a close eye on the dual forces of investment upside and dollar stabilisation as the key drivers for the ringgit’s path forward,” he said.
