JOHOR BARU – The Malaysian ringgit has strengthened to around 3.16 against the Singapore dollar, a move that was expected and has had little impact on cross‑border trade between Malaysia and Singapore, according to Universiti Teknologi Malaysia senior lecturer Professor Dr Nanthakumar Loganathan.
He said the currency shift aligns with the ringgit’s broader gains against the US dollar since the third quarter of 2025 and, for now, does not materially alter bilateral commerce because the Singapore dollar remains substantially stronger than the ringgit.
Trade channels largely unchanged as investors keep faith
Nanthakumar argued that foreign direct investment (FDI) from Singapore continues to trend higher and has helped cushion any short‑term currency effect on trade flows. He pointed to several large‑scale investments in Johor-particularly those tied to the Johor‑Singapore Special Economic Zone (JS‑SEZ), which was set up to deepen cross‑border industrial and logistics integration-as signals of continued confidence in Malaysia’s outlook.
“The rise of the ringgit against the Singapore dollar will not have a major effect, as foreign direct investment from Singapore – one of Malaysia’s largest trading partners – continues to show an upward trend,” he said.
He added that a firmer currency can bolster sentiment by signaling exchange‑rate stability and a more resilient economic trajectory, potentially supporting additional inflows into government‑priority sectors, with the JS‑SEZ among the expected beneficiaries. For Singapore‑based manufacturers and services firms already using Johor as a lower‑cost production and services base, the modest currency move has so far been absorbed into existing cost structures rather than prompting changes to sourcing or hiring plans.
What the latest strengthening means for the real economy
Nanthakumar cautioned that the ringgit’s strength could prove temporary given global economic uncertainty. He also noted that exporters could face mild pressure if the currency continues to appreciate, as Malaysian goods would become more expensive in international markets relative to regional peers with weaker currencies.
At the same time, he highlighted that Malaysia’s growth is not solely reliant on merchandise trade: “Malaysia is no longer fully dependent on goods exports. The services sector remains the largest contributor to gross domestic product, notably tourism, banking, transport and related subsectors,” he said. A firmer ringgit can lower imported input costs and external debt servicing, partly offsetting the squeeze on export margins, especially for firms with significant foreign‑currency liabilities.
To clarify the moving parts he identified:
- Exchange rate context: around 3.16 ringgit to the Singapore dollar; the Singapore dollar remains stronger, preserving Singapore’s purchasing power for travel and investment into Malaysia.
- Trend since 2025: broader ringgit gains versus the US dollar from the third quarter of 2025, in line with improving domestic data and steadier regional capital flows.
- Investment signal: several large projects in Johor linked to the JS‑SEZ were cited as evidence of investor confidence in Malaysia’s medium‑term policy direction and infrastructure push.
- Trade impact: limited so far; possible mild export pressure if appreciation continues or accelerates, particularly for low‑margin manufacturers.
- Growth composition: services remain the largest contributor to GDP, including tourism, banking and transport, giving policymakers more levers beyond merchandise exports to manage shocks.
Policy and fundamentals in focus
Asked whether recent currency performance reflects domestic fundamentals, Nanthakumar attributed the positive trend to stronger conditions at home and prudent fiscal policies in areas such as taxation and spending management to contain inflation and unemployment. He said investors are also watching how closely Malaysia adheres to medium‑term fiscal targets and structural reforms promised under its national development blueprints.
He said Bank Negara Malaysia’s monetary policy framework-particularly management of the overnight policy rate under its mandate to maintain price stability and sustainable growth, as set out by the central bank statute and its policy statements-remains central to economic sustainability and to anchoring expectations on the ringgit.
Business perspective from Johor
Johor Bumiputera Entrepreneurs Council member Samsudin Ismail welcomed a stronger currency but said benefits must rest on “solid and sustainable economic fundamentals” to be felt by households facing living‑cost pressures. He added that any appreciation is meaningful only if it proves consistent rather than a temporary move driven solely by external factors.
“If it is temporary, we need to assess other fundamentals, as currency appreciation alone does not necessarily lift the economy to its potential,” he said. Samsudin also noted that currency volatility shapes business strategy for Bumiputera entrepreneurs involved in cross‑border trade and argued that the strength of the ringgit would produce tangible gains only alongside economic growth, higher investment, job creation and productivity improvements with clear spillovers to ease living costs.
He added that Bank Negara Malaysia’s monetary policy, including its management of the overnight policy rate amid global financial market volatility, remained crucial to economic sustainability. For smaller Johor‑based firms, he said, policy clarity on interest rates, targeted support for the JS‑SEZ and measures to reduce regulatory friction at the border will matter at least as much as incremental shifts in the ringgit‑Singapore dollar rate.
