Malaysia's ringgit strengthened to 3.99 per US dollar on January 23, reaching levels last seen in January 2021 and testing the competitiveness of the country's export-driven manufacturing sector.
The currency opened at 4.0285 per dollar following Bank Negara Malaysia's decision to hold the Overnight Policy Rate at 2.75 percent, continuing a rally that has seen the ringgit appreciate more than 12 percent since its 2025 low of 4.51 in early October.
Kuala Lumpur's decision to maintain rates while the US Federal Reserve signals potential cuts later in 2026 has narrowed interest rate differentials and supported the Malaysian currency. The Dollar Index fell 0.48 percent to 98.287 points as US inflation data showed Personal Consumption Expenditures rising to 2.8 percent in December.
But the ringgit's strength presents a double-edged sword for Malaysia, where exports account for 60 percent of GDP—among the highest ratios in Southeast Asia.
Export Sector Pressure
Malaysia exported 1.54 trillion ringgit ($384 billion) worth of goods in 2025, with electrical and electronics accounting for 40 percent, palm oil 6 percent, and petroleum products another 9 percent. A stronger ringgit makes these exports more expensive in dollar terms, eroding price competitiveness against Thailand, Vietnam, and Indonesia.
The country's rubber glove manufacturers—which supply an estimated 65 percent of global demand—face particular pressure. Companies including Top Glove, Hartalega, and Supermax derive 90-95 percent of revenues in dollars while incurring costs in ringgit. Each 10-sen appreciation in the ringgit translates to millions in reduced dollar-equivalent earnings.
Penang's semiconductor manufacturers, which produced $72 billion in chips and components last year, similarly compete on thin margins where currency movements directly impact contract renewals.
Bank Muamalat Malaysia's chief economist told reporters.
