Malaysian ringgit looks likely to weaken as central bank stands pat amid global tightening

Malaysia’s relatively strong economy looks set to create a rather counter-intuitive outcome: a weaker currency, at least in the near term. Even as many central banks tightened around the world, Bank Negara Malaysia kept rates on hold in September, citing a limited inflation pass-through from the Hormuz energy crisis.

We calculated Malaysia’s daily trade-weighted exchange rate, which aims to strip away the effect of the outsized importance of the dollar (gaining a more holistic perspective on an economy’s interdependence with major trading partners, and tracking the methodology used by the Bank for International Settlements).

For much of the period since early 2025, Malaysia’s key rate was overall higher than those of its trading partners, supporting the ringgit. But since mid-2025, that yield advantage has eroded. And currency depreciation since April appears to be modest enough not to prompt an Indonesian-style stabilization via monetary tightening.