Ringgit: Long-term appreciation not sustainable in the long-run

The recent appreciation of the Malaysian ringgit, driven by short-term factors like U.S. interest rate expectations and robust export growth, may not be sustainable in the long run. While a stronger currency lowers import costs, it also makes Malaysian exports less competitive abroad. Structural shifts in the Malaysian economy, including the rise of the non-tradable sector and a declining trade ratio, suggest a long-term downward trend in the currency’s fundamentals. Additionally, lower savings rates and investment lethargy in the tradable sector point to challenges ahead. As a result, the current ringgit strength could be temporary rather than a lasting trend.​

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Ringgit weakness

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