KUCHING: Malaysia’s ringgit may find its firmest support from what the country exports rather than what it hosts, with manufacturing and commodities offering more stability than tourism, says an economist.
Swinburne University of Technology Sarawak Campus lecturer Nivakan Sritharan said the ringgit’s near-term strength is most closely tied to export earnings, particularly from the electrical and electronics (E&E) sector, while tourism remains vulnerable to sudden external shocks.
“In the near term, the E&E sector is likely the most important driver of ringgit strength, while tourism is the most fragile,” he told Sarawak Tribune.
He said Malaysia’s external position is heavily influenced by export performance, noting that E&E exports now account for nearly half of total exports. Growth in the sector has been supported by demand linked to semiconductors, artificial intelligence applications, data centres and 5G technology.
Beyond short-term cycles, Nivakan said structural changes are strengthening the export base, pointing to global supply chain shifts and Malaysia’s National Semiconductor Strategy.
“This makes E&E a strong and relatively stable support for the ringgit in the coming months,” he said.
Commodities also help underpin the currency, with Nivakan citing palm oil prices hovering around RM4,100 per tonne. However, he noted that commodity support remains exposed to weather patterns, producer policies and global price volatility.
“Prices remain firm around RM4,100 per tonne, supported by tight global supply and biofuel demand,” he said.
In contrast, he said tourism, despite recovering visitor arrivals and optimism surrounding the Visit Malaysia 2026 campaign, remains the least predictable contributor to currency strength.
“Tourism is highly sensitive to global economic conditions, currency movements, and geopolitical or health disruptions,” he said, adding that income from tourism can fluctuate more rapidly than export-based sectors during periods of global uncertainty.
On the ringgit’s recent appreciation, Nivakan said it reflects a mix of cyclical and structural factors.
“The sustainability depends largely on external conditions,” he said.
Cyclical support has come from improving global demand for semiconductors and commodities, alongside shifts in global monetary policy. Malaysia’s trade surplus, record export performance and strong external balance have also provided near-term support.
Over the longer term, he said competitiveness is reinforced by Malaysia’s role in semiconductor packaging and testing, rising foreign investment in technology infrastructure, and strong services growth linked to tourism and logistics.
To assess whether the ringgit’s gains are sustained, Nivakan said several indicators should be monitored, including E&E export growth, global semiconductor demand cycles, the current account balance, foreign inflows into local equities and bonds, US Federal Reserve policy and overall global risk sentiment.
On interest rates, he said the ringgit is influenced by rate dynamics but not driven by them alone, with domestic fundamentals playing an equally important role.
He noted that the Federal Reserve’s pause in rate cuts and Malaysia’s decision to keep the overnight policy rate (OPR) at 2.75 per cent suggest interest differentials may not narrow sharply in the short term.
“If the differential does not narrow, the ringgit could still remain stable but may face limits to further appreciation,” he said.
On whether individuals should hold ringgit or US dollars, Nivakan said the decision depends on personal and business circumstances.
“Holding US dollars can still be rational,” he said, citing overseas education, international travel, import-based business operations and diversification during periods of global uncertainty, when the US dollar often strengthens as a safe-haven currency.
He cautioned against trying to time currency movements based on short-term trends.
“The biggest mistake people make is attempting to time short-term currency movements based on recent trends or speculation,” he said.
For households, he said the effects of a stronger ringgit are typically felt first through imported prices and cost of living, followed by debt servicing and purchasing power.
A firmer currency lowers the cost of imported goods such as food inputs, electronics, vehicles and travel, helping to moderate inflation. Households with foreign-currency loans may also benefit from lower repayments, while businesses importing raw materials could see improved margins.
“Wage effects typically emerge more slowly,” he said.
