Looking ahead to 2025, the trajectory of the Malaysian Ringgit (MYR) against the US Dollar (USD) is poised to be influenced by a combination of domestic economic policies, global market trends, and geopolitical factors. With the current exchange rate at RM4.38 to 1 USD, the MYR’s path will depend on both Malaysia’s internal strategies and shifts in the global market.

The MYR’s future value depends on Malaysia’s economic health. The government has emphasized fiscal discipline, with expectations of a fiscal deficit under 4% of GDP.

Finance Minister Anwar Ibrahim’s commitment to sustainable growth aims to stabilize the economy and boost investor confidence. This stability is key to attracting foreign direct investment (FDI). When investors feel secure, the MYR stands to strengthen against currencies like the USD.

Externally, the monetary policies of the United States (US) will play a significant role. The Federal Reserve’s signals of easing interest rates could weaken the USD. Projections suggest rates will fall from 5% to around 4.4% by the end of 2024, further dropping to approximately 3.4% by 2025. Lower US rates typically make emerging market currencies, including the MYR, more attractive.

A US spokesperson noted, “we remain committed to policies that support sustainable growth,”. This stance aligns with the appreciation of the MYR, as foreign capital flows into Malaysia.

This capital influx could strengthen the MYR further. Historically, when US rates drop, investors move capital into emerging markets like Malaysia, boosting local currencies. If this trend holds, analysts predict the MYR could range between RM3.90 and RM4.62 against the USD throughout 2025. However, these forecasts come with a note of caution due to the unpredictability of global financial markets.

However, challenges remain for Malaysia’s export-driven economy. A stronger MYR could make Malaysian goods more expensive for international buyers, potentially hurting key export sectors like electronics and palm oil.

Policymakers must balance currency stability with the need to maintain competitiveness on the global stage. A stronger ringgit could dampen demand for Malaysia’s exports.

In summary, the MYR’s outlook in 2025 depends on internal economic management and global financial conditions. While there’s optimism for a stronger MYR, supported by solid fiscal policies and favourable international shifts, caution is required.

The risk of a stronger ringgit hurting Malaysia’s export competitiveness remains a key factor to watch. As we move into 2025, all eyes will be on Malaysia as the country navigates these complex economic challenges.

AUTHOR: SUNTHEREN YOGANATHAN, Lecturer at Politeknik Seberang Perai, and DR. SHAHDATUNNAIM AZMI, Senior Lecturer at the Faculty of Computer Science and Information Technology,  Universiti Tun Hussein Onn Malaysia (UTHM)

This is the author's personal view and does not necessarily represent the views or official position of RTM.