KUALA LUMPUR: Malaysia’s foreign exchange reserves have risen to their highest level since June 2022, strengthening the country’s ability to manage market volatility.
At the end of April, Malaysia’s net forex reserves reached US$94.7 billion, driven by strong foreign investment in local bonds and a weaker US dollar. This allowed Bank Negara Malaysia (BNM) to reduce its net short forward FX position, further boosting the nation’s financial defenses.
Winson Phoon, head of fixed-income research at Maybank Securities, said the combination of shrinking short positions and higher reserves means net reserves are growing faster. He added that this improvement enhances Malaysia’s external resilience and supports the stability of the ringgit.
This boost in reserves comes at a crucial time. Ongoing US tariffs, tensions between the US and China, and global geopolitical risks have increased currency volatility. As the US dollar weakens, emerging markets like Malaysia are experiencing shifts in their forex dynamics.
Because Malaysia depends heavily on trade, its economy and currency are vulnerable to trade conflicts between its two main export partners—the US and China. Part of the recent rise in reserves is due to a US$5 billion inflow into Malaysian government securities this quarter, marking a record quarterly inflow since 2005.
Global investors are optimistic about the ringgit’s outlook and expect interest rate cuts, as BNM remains the last central bank in Southeast Asia to hold rates steady.
This contrasts with the situation in December, when BNM’s net short forward FX position hit US$29.2 billion, nearly an all-time high, as the central bank used currency forwards to support the ringgit. At that time, foreign funds were pulling out of Malaysian bonds for the fourth consecutive month, and the ringgit was one of the worst-performing currencies in emerging Asia.
By April, BNM had reduced its net short forward position to US$24 billion, the lowest since February 2024. This unwinding, which involves selling ringgit and buying dollars, has not hurt the spot ringgit’s value. In fact, the ringgit is now Southeast Asia’s second-best performing currency this quarter, behind only the Singapore dollar.
Phoon said the gradual reduction of short forward positions should not create major challenges for the ringgit’s strength going forward.
