A Currency on the Rise
The Malaysian ringgit has recently surged to a five-year high against the US dollar, trading around 4.04 and marking a gain of approximately 20 per cent from previous levels near 4.80. This dramatic appreciation has sparked a significant shift in consumer behaviour across the country. Malaysians are capitalising on the favourable exchange rate to exchange currency early and book international trips, keeping money changers busy despite the usual post-festive lull in activity.
This financial shift is not merely a matter of national pride or economic statistics. It translates directly to increased purchasing power for everyday Malaysians, particularly those planning to travel abroad. The stronger currency allows them to get more value for their money when visiting foreign destinations, making international tourism more accessible and appealing.
Jajakhan Kader Gani, the president of the Malaysian Association of Money Services Business, highlighted the unusual market activity.
“We had expected the crowd to decline this week, but it is still at around 70 per cent,”
He noted that the current level of the ringgit is among the strongest seen in recent years, creating a busy environment for currency exchange services.
Destination Shifts and Traveler Preferences
As the ringgit climbs, Malaysians are broadening their travel horizons. While traditional favorites such as Bangkok, Tokyo and Bali remain strong, the stronger currency is encouraging travellers to dream bigger. Travel platforms have logged a 50 to 60 per cent jump in searches over the past three months for destinations further afield.
There is a noticeable trend toward premium travel. Malaysians are increasingly looking toward Paris, London and Istanbul for their holidays. Japan and China are leading the rebound in Asian travel, while Europe is edging back into itineraries for those seeking longer haul experiences. This shift indicates that the increased purchasing power is not just leading to more travel, but to different types of travel, with a focus on quality and luxury experiences that may have previously been out of reach.
The demand for foreign currencies reflects these changing preferences. The Japanese yen, which remains at multiyear lows, continues to see the strongest demand. This is followed closely by China yuan and Indonesian rupiah. However, interest in the Thai baht has slowed. Analysts attribute this decline to flooding in southern Thailand and broader geopolitical concerns, which have dampened enthusiasm for travel to the region despite its proximity.
The Economic Drivers Behind the Rally
The ringgit rally is not occurring in a vacuum. It is the result of a confluence of factors that have bolstered confidence in the Malaysian economy. Malaysia is on track for its best economic performance in decades, with the currency appreciating more than 12 per cent against the US dollar recently. This makes it one of the best-performing emerging market currencies globally.
Robust economic data underpins this strength. Malaysia economy expanded at a faster pace of 5.2 per cent year on year in the third quarter of 2025, up from 4.4 per cent in the previous quarter. This accelerated growth was driven by household demand, favourable labour market conditions and a strong rebound in export performance.
Government policy has also played a crucial role. Prime Minister Anwar Ibrahim administration has introduced investment-friendly reforms that are attracting foreign capital. These policies make it easier for foreign businesses to invest in sectors such as semiconductors, electric vehicles and digital technology. As a result, Malaysia net foreign direct investment inflow jumped to RM8.5 billion in the third quarter of 2025, a sharp increase from the previous quarter.
Global monetary policy shifts have contributed as well. As the US Federal Reserve cuts interest rates, capital flows out of the US and into emerging markets like Malaysia. This influx of investment strengthens the local currency. Saktiandi Supaat, the head of foreign exchange research at Maybank, explained that more capital is leaving the US and finding its way into markets like Malaysia, resulting in the strengthening of the ringgit versus the US dollar and other currencies.
Political Stability and Investor Confidence
The political landscape has also stabilised after years of turmoil, providing a foundation for economic growth. Supporters of Prime Minister Anwar Ibrahim view the currency surge as evidence of his financial acumen. Mohd Afzanizam Abdul Rashid, the chief economist at Bank Muamalat Malaysia, noted that this stability has facilitated more effective policymaking and implementation.
This stability boosts confidence in the ringgit among investors. When a country is viewed as politically stable with sound economic management, its currency becomes a more attractive asset. This perception reinforces the upward momentum of the exchange rate.
Impact on Regional Tourism Dynamics
The surge of the ringgit is reshaping tourism dynamics within Southeast Asia, creating a complex picture of winners and losers. While Malaysians enjoy greater spending power abroad, the stronger currency presents challenges for Malaysia inbound tourism sector.
Neighboring countries with weaker currencies, such as Indonesia and Vietnam, become significantly cheaper destinations for international tourists. A weak currency acts as a discount for visitors, boosting competitiveness. For example, Indonesia tourism sector benefits from a weak rupiah, as it makes the country relatively cheap for foreign visitors. Similarly, Vietnam depreciated dong has enhanced its appeal, contributing to a surge in visitor arrivals.
This puts pressure on Malaysia price competitiveness. A stronger ringgit makes Malaysia a more expensive destination for budget-conscious travellers from neighbouring countries. Malaysia expects a potential decline in tourism from currency-sensitive markets like Indonesia and Thailand due to the stronger ringgit. This creates a challenge for tourism operators who must now compete on value and experience rather than just price.
The impact is also felt across the causeway in Singapore. The ringgit has strengthened against the Singapore dollar, with one Singapore dollar now buying RM3.19, down from above RM3.30 for most of 2025. While this shift gives Malaysians more spending power in Singapore, it makes trips to Malaysia costlier for Singaporeans. Analysts expect this exchange rate to stay near current levels through the rest of 2025, which may prompt some Singaporeans to think twice before crossing the Causeway for cheaper groceries or weekend getaways.
A Double-Edged Sword for the Economy
The strong ringgit presents both benefits and drawbacks for the broader Malaysian economy. For consumers and importers, the news is largely positive. A stronger currency lowers the cost of imported goods and services. This reduces inflationary pressure and increases the purchasing power of households. Consumers can buy imported electronics, vehicles and other goods at lower prices, effectively raising their standard of living.
However, exporters face significant headwinds. Malaysian goods become more expensive for foreign buyers when the ringgit is strong. This can reduce demand for exports, potentially hurting manufacturers and the agricultural sector. The tourism sector, which relies on selling Malaysia as a destination to foreigners, also faces a “double-whammy” of reduced price competitiveness and existing global economic challenges.
Nigel Wong from the Malaysian Association of Tour and Travel Agents (MATTA) has pointed out the mixed impact of the strong ringgit. While it boosts outbound travel, it creates hurdles for attracting inbound visitors who might find better value in other countries with weaker currencies.
The View from Southern Thailand
Despite the general slowdown in demand for the Thai baht, cross-border tourism remains a vital economic link. Recent data shows that Malaysian tourists continue to play a crucial role in the economy of Southern Thailand. During the Merdeka Day weekend and Malaysia Day festivities, Malaysian visitors injected approximately RM39 million into the region.
More than 75,000 Malaysian visitors opted for Southern Thailand as their destination of choice during this period. Key beneficiaries included Narathiwat, Pattani, Hatyai and Yala. This spending supported local businesses, including hotels, restaurants, tour operators and transport services. The data shows that accommodation bookings rose dramatically, with nearly 90 to 95 per cent of hotel, villa and resort rooms filled for the holiday period.
This underscores the importance of cross-boundary tourism between Malaysia and Southern Thailand. Even with currency fluctuations and geopolitical concerns, proximity and cultural ties continue to drive significant economic activity across the border. The growth of air connectivity has also played a pivotal role, with new direct flight routes making it easier for tourists to travel between the two countries.
Strategic Responses and Future Outlook
As the tourism landscape shifts, industry stakeholders are adapting their strategies. In Thailand, concerns about the strong baht have prompted discussions about measures to curb the currency strength to protect exports and tourism. Industry experts warn that an overstrong currency threatens to undermine price competitiveness.
In Malaysia, the focus is on leveraging the strong ringgit to attract high-value investments and tourism. The government is prioritising investments that promote economic growth and create high-value jobs through frameworks like the National Investment Aspirations. There is also a push to improve tourism infrastructure and services to make Malaysia a compelling destination regardless of currency fluctuations.
Penang serves as a prime example of how connectivity and policy can drive growth. The state has seen massive surges in visitors from China and India, up 90 per cent and 138 per cent respectively, driven by visa-free travel policies and new direct international flights. This shows that while currency matters, strategic policy decisions regarding visa access and air connectivity can have an even more profound impact on tourist arrivals.
Looking ahead, analysts expect the ringgit to stabilise at its current strength levels. The currency appreciation is supported by solid economic fundamentals, but the speed of the recent rally raises questions about sustainability. For the rise to hold, analysts believe supporting drivers must show up elsewhere, such as in a stock market rally or stronger foreign inflows into Malaysian bonds.
Risks remain, particularly regarding global monetary policy. A delay in the Federal Reserve rate cuts could strengthen the US dollar and trigger portfolio outflows from emerging markets. However, the overall sentiment remains positive, with Malaysia economic reforms and growth trajectory providing a strong foundation for the currency future.
The Bottom Line
- The Malaysian ringgit has surged to a five-year high against the US dollar, gaining about 20 per cent.
Money changers report high activity as Malaysians exchange currency early for travel.
Travel platforms report a 50 to 60 per cent jump in searches for international destinations.
Demand for the Japanese yen and Chinese yuan is high, while interest in the Thai baht has slowed.
Malaysia GDP growth accelerated to 5.2 per cent in the third quarter of 2025.
Foreign direct investment inflows jumped sharply in the third quarter, supporting the currency.
A stronger ringgit lowers import costs but hurts exporters and inbound tourism competitiveness.
Singaporeans may find causeway trips costlier due to the ringgit appreciation.
Visa-free policies and direct flights are crucial for driving inbound tourism despite currency strength.
Analysts expect the ringgit to remain stable near current levels in the near term.
