Ringgit Strength Against Singapore Dollar Seen as Limited Risk to Bilateral Trade

Johor Baru, Jan 12: Malaysia’s ringgit has recently strengthened to around 3.16 against the Singapore dollar, but economists say the move is unlikely to significantly affect cross-border trade between the two neighbors.

Professor Dr. Nanthakumar Loganathan, a senior lecturer at Universiti Teknologi Malaysia, noted that the ringgit’s rise aligns with its broader gains against the US dollar since the third quarter of 2025. He added that the Singapore dollar remains substantially stronger, limiting any direct impact on trade flows.

“The appreciation of the ringgit against the Singapore dollar is not expected to have a major effect,” he said. “Foreign direct investment from Singapore, one of Malaysia’s largest trading partners, continues to trend upward, reflecting strong investor confidence.”

Dr. Nanthakumar highlighted several significant investments in Johor, particularly within the Johor-Singapore Special Economic Zone (JS-SEZ), as clear examples of continued Singaporean confidence in Malaysia’s economic prospects.

While the ringgit’s current strength may be temporary due to global economic uncertainties, he said it reflects the positive domestic fundamentals and prudent fiscal policies implemented by the government, including measures to manage inflation and unemployment.

He also noted that Bank Negara Malaysia’s monetary policy, including its management of the overnight policy rate amid global market volatility, remains crucial in maintaining economic stability.

“A firmer ringgit can boost confidence among traders and foreign investors by signalling exchange rate stability and a resilient economic trajectory,” he said. “It could also encourage higher FDI inflows, particularly into government-priority strategic sectors such as the JS-SEZ.”

However, Dr. Nanthakumar cautioned that continued currency appreciation could place mild pressure on exports, as Malaysian goods may become more expensive compared to regional peers with weaker currencies. Nevertheless, he pointed out that Malaysia’s economy is less dependent on goods exports than in the past, with the services sector, including tourism, banking, and transport, remaining the largest contributor to GDP.

Regarding trade with Singapore, he said bilateral commerce is expected to remain robust, as Malaysian products continue to be competitive and relatively affordable in the republic.

Separately, Johor Bumiputera Entrepreneurs Council member Samsudin Ismail emphasized that the ringgit’s gains must be underpinned by sustainable economic fundamentals to benefit the public and address rising living costs. “Currency appreciation alone does not necessarily lift the economy to its potential. The gains must be supported by economic growth, higher investment, job creation, and productivity improvements,” he said.

Samsudin also highlighted that currency volatility influences business strategies, particularly for Bumiputera entrepreneurs involved in cross-border trade, and that consistent, long-term appreciation is needed to deliver meaningful benefits.