Policy Certainty, Reforms And Current External Factors Are Working For Ringgit - BNM Governor
By M.Saraswathi & Karina Imran
KUALA LUMPUR, Jan 27 (Bernama) -- Policy certainty, ongoing government reforms and supportive external factors have contributed to the ringgit’s steady appreciation to levels last seen in 2018, said Bank Negara Malaysia (BNM) Governor Datuk Seri Abdul Rasheed Ghaffour.
The ringgit traded at 3.9540 against the US dollar at the lunch break today, marking a fresh high since May 15, 2018, when it last stood at the same level, and extending its run of fresh highs. The currency spiralled to breach the 4.00 psychological level at the close on Monday against the greenback.
He said that while both external and domestic factors play vital roles, domestic factors remain the key focus for strengthening economic fundamentals, enhancing competitiveness, and sustaining reform measures supportive of long-term growth. These are the drivers for the ringgit going forward.
“These things are very important, and if we get them right, the outcome is the ringgit becoming more attractive and investments flowing into the country,” he told Bernama in an interview today.
These factors, Abdul Rasheed said, can also be divided into short- and long-term.
“Short-term factors are like capital flows. They can come in, go out and then flow back in again. Interest rate differentials are also short-term. Like now, they may be narrowing. But we don’t know how long before they start widening again,” he said.
Asked about the central bank’s intervention in the foreign exchange market, Abdul Rasheed said that, regardless of the currency’s direction, the central bank’s objective is to ensure orderly market functioning.
“We don’t set the level of ringgit. We don’t influence its level. The market determines it,” he said.
“Our role is to ensure an orderly market. We want to ensure sufficient liquidity in the market. This principle guides our presence in the market.”
Solid economic fundamentals, the BNM governor pointed out, will provide long-term support for the ringgit.
“Our fundamentals are solid, whether on the external side, domestic policy or the banking sector, among others. Our economy is also highly diversified.
“We are also a part of the global supply chain of important products, such as for artificial intelligence (AI),” he said.
For example, Abdul Rasheed highlighted that demand for electrical and electronic products is very high.
He added that the country’s productivity and efficiency are also vital as they attract high-quality investments that create high-income jobs.
“All these will then have a higher multiplier impact on the economy,” he said.
Abdul Rasheed explained that implementation of reforms, such as targeted subsidies, is planned and executed in a way that does not disrupt the economy.
He elaborated that the government’s commitment to fiscal discipline, as well as the prospect of the country’s growth, are also contributing factors to the positive momentum.
The government is on track to reduce its fiscal deficit to 3.5 per cent of the GDP in 2026, from an estimated 3.8 per cent last year.
According to the Department of Statistics Malaysia’s (DOSM) advance estimates, Malaysia’s economy is projected to grow by 5.7 per cent in the fourth quarter (4Q) of 2025, supported by strong performance in the main economic sectors and robust domestic demand.
The advance estimates for 4Q 2025 growth at 5.7 per cent showed the economy accelerated from the 5.2 per cent expansion recorded in the previous quarter.
Abdul Rasheed added that although external factors are beyond the control of policymakers, current global conditions are working in favour of the ringgit.
“For example, the narrowing interest rate differential and easing financial conditions in advanced economies are providing a tailwind for the ringgit at this time,” he said.
Hence, Abdul Rasheed said it is difficult to single out one factor that is contributing to the ringgit’s strength.
“It’s difficult to single out because it’s a play of multiple factors. Sometimes it is domestic factors, and sometimes it is external factors. What we are seeing right now is a play of multiple factors,” he said.
-- BERNAMA