Malaysia’s Ringgit Faces Challenges Amid Trade Tensions and Rate Cut Expectations
- simpleisgd
- Mar 17
- 2 min read
After a strong 2024, Malaysia’s ringgit is showing signs of weakness, with analysts predicting a potential decline to 4.6 per US dollar by mid-2025. The currency faces pressure from global trade tensions and the possibility of interest rate cuts by Malaysia’s central bank, Bank Negara Malaysia (BNM).
Impact of Trade Tensions
Global trade issues, particularly US tariffs on China, could slow Malaysia’s growth and weigh on the ringgit. The US is Malaysia’s third-largest trading partner, and rising tariffs are expected to negatively affect exports, especially in the semiconductor sector.
Expectations of Rate Cuts
Analysts predict that Bank Negara Malaysia may reduce interest rates later this year due to the economic slowdown. The likelihood of a 25 basis point rate cut within the next 12 months has increased, adding pressure on the currency.
The Ringgit’s Correlation with the Yuan
The Malaysian ringgit is closely tied to the Chinese yuan, so any pressure on the yuan could also affect the ringgit. With global economic uncertainty, the ringgit could continue to weaken, as it has historically done during the second quarter of the year.
Potential Relief from US Rate Cuts
On the bright side, expectations of US rate cuts due to recession fears could help ease pressure on the ringgit. If the US economy weakens, some analysts predict the ringgit could rebound to 4.35 per US dollar by the end of 2025.
Bank Negara Malaysia's Stance
Bank Negara Malaysia has kept its rates steady, citing a resilient economy, but analysts suggest that slowing growth and external factors, such as US tariffs, may impact the ringgit’s future performance.
The Road Ahead
The coming months will be crucial in determining whether the ringgit can maintain its strength or face further challenges. While external factors continue to pressure the currency, there may be opportunities for recovery depending on global economic shifts.
