Malaysia’s currency strengthens against US dollar

Malaysia’s efforts in wooing investors to bring home their returns have succeeded in propping up the MYR but the path to recovery is littered with questions of if and when the U.S. Federal Reserve will cut rates.

In the meantime, the Malaysian government should continue to pursue structural economic reforms and use persuasion instead of intrusive capital controls to build investor confidence and cushion the ringgit, analysts said.

The Ministry of Finance said in a post on X social network on May 26 that the MYR recorded the best performance against the U.S. dollar among 10 regional currencies as of mid-May.

From Feb 26 to May 17, the ringgit strengthened 2% against the greenback, while the SGD, CNY, INR and THB depreciated by 0.2%, 0.4%, 0.7% and 1%, respectively.

The ministry said the strengthening ringgit comes after action it took with the central bank three months ago to encourage government-linked companies (GLC) and government-linked investment companies (GLIC) to bring home income from foreign investments.

The efforts also include increasing interactions with exporters to convert proceeds into the MYR, monitoring conversions of export and import proceeds, as well as strengthening the domestic economy and continuing promised fiscal reforms.

Lee Heng Guie, an economist and executive director of the Socio-Economic Research Center, said the Malaysian government was painting a “narrative” that the measures it took had proven effective in strengthening the MYR.

The central bank has maintained that the underperforming MYR, which in February fell to its lowest level since the Asian Financial Crisis in the late 1990s, is not reflective of the country’s economic fundamentals and growth.

According to the central bank, Malaysia saw higher economic activity in the first quarter of 2024, driven by resilient domestic expenditure and a positive turnaround in exports.