Ringgit strengthens on limited impact from US tariffs

[MALAYSIA] On March 24, 2025, the Malaysian Ringgit opened stronger against the US Dollar, as markets reacted to the news of impending US tariffs. The Ringgit traded at 4.4155/4230, slightly up from the previous day's close of 4.4180/4220. Analysts attribute the upward movement to expectations that Malaysia would be one of the least affected countries by the US's upcoming reciprocal tariffs, scheduled to be implemented on April 2.

The Ringgit's performance has been largely influenced by forecasts that the tariffs would not have a significant impact on Malaysia's economy. This has boosted investor confidence, with many seeing the country as being relatively insulated from potential fallout due to its lower tariff rates compared to other nations.

Market Reactions to US Tariffs

Dr. Mohd Afzanizam Abdul Rashid, the Chief Economist at Bank Muamalat Malaysia Bhd, commented on the development, noting that market participants are closely watching how the new tariffs will unfold. He emphasized that the markets are in a "defensive mode," with global traders seeking refuge in the US Dollar, which is perceived as a safe haven in uncertain times. However, despite this caution, the Ringgit showed resilience, supported by the relatively minimal impact expected from the tariff hikes.

“Market participants will scrutinize details of the reciprocal tariffs and how they are going to affect each country’s economy,” said Dr. Afzanizam. He further explained that while the tariffs could potentially slow global growth, central banks are likely to respond swiftly to protect economic stability. This outlook has helped moderate concerns over the long-term economic repercussions of the tariffs, particularly for Malaysia.

The Tariff Landscape

According to data from the World Trade Organization (WTO), Malaysia’s tariff rate stands at 5.6%, one of the lowest among affected countries. In comparison, nations like India, Bangladesh, and South Korea have significantly higher tariff rates, with averages of 17.1%, 14.1%, and 13.4%, respectively. Dr. Afzanizam noted that this could position Malaysia as one of the least affected countries by the new tariff regime.

As Malaysia maintains relatively low tariff rates, it is expected to face minimal disruption in its trade activities compared to other economies with higher tariffs. This is contributing to a sense of optimism in the market, as traders anticipate that Malaysia’s exports will remain competitive despite the global trade shifts caused by the US tariffs.

Broader Currency Trends

Along with the Ringgit’s modest gains against the US Dollar, the local currency also strengthened against a basket of other major currencies. The Ringgit edged higher against the British Pound, trading at 5.7062/7158, up from 5.7151/7203. It also made gains against the Japanese Yen, rising to 2.9500/9552 from 2.9574/9602. Against the Euro, the Ringgit remained nearly unchanged, trading at 4.7842/7923, close to its previous level of 4.7843/7886.

The Ringgit's strengthening extended to ASEAN currencies as well. It saw an increase against the Singapore Dollar, reaching 3.3075/3134 from the prior 3.3081/3114. Similarly, it ticked up against the Indonesian Rupiah and the Thai Baht. Against the Philippine Peso, however, the Ringgit held steady at 7.70/7.72, nearly identical to the previous day’s level of 7.70/7.71.

Global Trade and Tariff Impacts

The ongoing US-China trade war has underscored the vulnerability of global markets to tariff increases. In this context, Malaysia's economic resilience is drawing attention. Despite global uncertainties, the country’s lower tariff rate offers a cushion against external shocks, making the Ringgit less susceptible to large fluctuations in the face of tariff hikes.

"Tariffs may lead to slower growth, necessitating a swift policy response from global central banks," Dr. Afzanizam said. As the markets anticipate central banks stepping in to manage any adverse effects, there is an overall sense of cautious optimism regarding Malaysia's ability to navigate these challenges.

The Outlook for the Ringgit

Looking ahead, the Ringgit's performance will depend heavily on how global trade dynamics evolve in response to the US tariffs. While Malaysia appears well-positioned to withstand the economic pressures, other factors, such as domestic economic policies and international market conditions, will continue to play a critical role.

Analysts expect the Ringgit to maintain a stable trajectory, with its relatively strong position against other major currencies reflecting confidence in Malaysia's trade policy and economic management. As Malaysia remains one of the least affected by the new tariffs, the currency is likely to see steady demand from foreign investors seeking stability.

Despite the potential for short-term volatility, Malaysia’s robust economic fundamentals, including a competitive export sector, are likely to support the Ringgit in the longer term. The country’s strategic trade partnerships and its role as a key player in ASEAN further bolster its resilience against external shocks, including the ongoing tariff battle between the US and other global economies.

The Ringgit has shown resilience in the face of global trade uncertainty, with market participants hopeful that Malaysia’s relatively low tariff rates will shield it from the worst effects of the US tariffs. The expectations of limited impact have contributed to a positive outlook for the Malaysian currency, which has strengthened against the US Dollar and other major currencies. As global trade dynamics continue to evolve, the Malaysian economy’s strong fundamentals and its strategic position in international markets will likely continue to provide a buffer against external shocks.

As Dr. Afzanizam noted, the details of the reciprocal tariffs will be closely scrutinized, but for now, Malaysia's relatively low tariff rates are a cause for optimism. With a stable Ringgit and expectations of continued economic stability, Malaysia seems poised to weather the storm of global trade disruptions, at least in the short term.