Malaysia’s currency, the Malaysian ringgit, recorded the best performance in Asia throughout 2025. It appreciated by nearly 9.7 percent against the US dollar on a year-to-date basis, making it the top-performing currency in the region.
Its performance surpassed that of the Thai baht, which rose 9.41 percent, the Singapore dollar at 5.94 percent, the New Taiwan dollar at 5.12 percent, the Chinese yuan at 4.03 percent, the South Korean won at 2.65 percent, and the Vietnamese dong, which gained only 1.15 percent.
The ringgit closed at around 4.07 per US dollar, its strongest level in nearly five years. This achievement also marks a significant recovery from around 4.80 per dollar in March 2024, its weakest level since the Asian Financial Crisis 1997-1998.
Key Drivers Behind the Strengthening
The ringgit’s appreciation has been driven by two major factors: strong domestic economic fundamentals and the weakening of the US dollar in global markets.
On the domestic side, robust exports, an improving fiscal deficit, and stable price conditions have supported the currency. Malaysia’s fiscal deficit narrowed to RM49.8 billion, or 3.3 percent of GDP, in the first nine months of 2025, down from 4.1 percent in the previous period.
This improvement was driven by higher government revenues and more efficient subsidy spending following rationalization measures.
On the external side, the US Dollar Index, which measures the strength of the US dollar against a basket of major trading partner currencies, declined by around 9.23 percent year-to-date.
This dollar weakness was partly driven by market concerns over the passage of the so-called “big beautiful bill” under Donald Trump, which is expected to worsen the United States’ long-term fiscal deficit at a time when national debt has reached a record 37 trillion US dollars, or about 120 percent of GDP.
Policy uncertainty has also weighed on the dollar, including threats by Trump to replace Jerome Powell after he resisted pressure to cut interest rates.
Interest rate cuts by the Federal Reserve have further supported the ringgit by narrowing the interest rate differential between the ringgit and the US dollar, which historically influences capital flows into emerging markets such as Malaysia.
The strengthening trend became clearly visible in April to May 2025, coinciding with Trump’s “Liberation Day” tariff announcement. In April, the ringgit moved from 4.45 to 4.431 before strengthening further to 4.201 by May 5. Momentum returned in the fourth quarter, rising from 4.233 in mid-October to 4.0753 on December 19.
Broad-Based Gains, With One Exception
The ringgit’s appreciation was not limited to the US dollar but extended to most major regional currencies.
It strengthened by 13.5 percent against the Indonesian rupiah, 10.5 percent against the Philippine peso, 8.5 percent against the Japanese yen, 5.8 percent against the Chinese renminbi, 3.8 percent against the Singapore dollar, 2.9 percent against the British pound, and 0.3 percent against the Thai baht.
The only pressure came from the euro, against which the ringgit weakened by around 2.8 to 2.99 percent. This was largely due to the euro’s strong appreciation of about 13.01 percent against the US dollar during the year.
The ringgit has also entered 2026 as Asia’s strongest-performing currency, signaling continued investor confidence in Malaysia’s economic outlook for the year ahead.
