Why the Malaysian Ringgit Has Been Appreciating Against the Singapore Dollar in Recent Months

Economic Growth in Malaysia
The primary driver of this appreciation is Malaysia’s unexpectedly strong economic performance in 2024. With a Q2 GDP growth rate of 5.8% year-on-year, Malaysia has outpaced expectations, particularly in sectors such as manufacturing and consumption. In contrast, Singapore’s GDP growth for the same period was a modest 2.9%. As Malaysia’s economy gains momentum, market analysts have revised their forecasts to anticipate a full-year growth rate of approximately 5%.

Impact of US Monetary Policy
Additionally, anticipated interest rate cuts by the U.S. Federal Reserve have provided further support for the Ringgit. As the Fed prepares for potential rate reductions, emerging market currencies, including the MYR, typically benefit from looser monetary conditions. The US’s economic signals are creating a favorable environment for the Ringgit, despite the SGD’s overall strength against the US dollar.

Stable Monetary Policy in Malaysia
Bank Negara Malaysia’s decision to maintain its benchmark interest rate at 3% amid steady inflation (expected to remain below 3% in 2024) adds a layer of stability to the MYR. This cautious yet steady monetary policy allows the Ringgit to thrive against a backdrop of emerging market vulnerabilities.

Broader Context of Currency Movement
While the MYR has appreciated by approximately 4.5% against the SGD since mid-July, it’s crucial to consider this movement in a broader context. Over the past year, the Ringgit has only gained about 2.6% against the SGD, and it has declined by nearly 8.5% over the last five years. For the Ringgit to continue strengthening, Malaysia’s economic growth must outpace Singapore’s consistently, coupled with favorable global monetary policies.

​In summary, the recent appreciation of the MYR against the SGD highlights a complex interplay of economic performance, global monetary policies, and regional dynamics. As Malaysia continues to grow, currency fluctuations will remain a focal point for traders and investors in both nations.