Nearly a quarter-century of currency history ended Wednesday in Kuala Lumpur. The ringgit touched 4.5028 against the US dollar. That is the lowest number recorded since the Asian Financial Crisis of 1998. The last time the Malaysian currency traded this cheaply, the country was still under capital controls. Mahathir Mohamad was prime minister. The twin Petronas Towers had not yet opened.
This is not a repeat of 1998. The mechanism is different. Back then, a sudden flight of foreign capital and a collapsing banking system drove the crash. Today, the pressure is slower and more structural. The ringgit has been weakening for months against a strengthening US dollar, driven by Federal Reserve interest rate hikes and global risk aversion. Wednesday’s drop is the latest step in that long, grinding slide.
What makes the day unusual is what else happened. Bursa Malaysia, the country’s stock exchange, closed higher. The benchmark index rose. Local institutions bought RM58 million worth of shares. They were the only net buyers in the market. Foreign investors sold RM42 million. Local retailers sold RM16 million. The buying was enough to push the market up, but not enough to change the underlying direction of capital. Foreign money is still leaving. Domestic institutions are catching the falling knife.
The volume was there. 2.36 billion shares changed hands. Total value hit RM1.62 billion. But the breadth told a different story. Losers outnumbered gainers 477 to 348. More stocks fell than rose. The rally was narrow. It was not a vote of confidence in the broad economy. It was a pocket of buying in specific names, PMB Technology-LA among them.
That is the divergence at the heart of Wednesday’s session. Equities rallied. The currency collapsed. On the surface, they contradict each other. Below the surface, they tell the same story: a market under strain, held up by local capital while the external account deteriorates.
The ringgit’s weakness is not abstract. A weaker currency raises the cost of imported goods. Malaysia imports food, machinery, and intermediate components for its manufacturing sector. Those costs feed through to consumer prices. Inflation, already elevated, gets another push. The central bank, Bank Negara Malaysia, faces a hard choice. Raise interest rates to defend the currency and risk slowing the domestic economy. Or hold rates and watch the ringgit slide further, importing more inflation.
Wednesday’s level — 4.5028 — is a line in the sand only in retrospect. There is no technical reason the ringgit cannot go lower. The US dollar remains strong. The Fed shows no sign of pausing its tightening cycle. Malaysian exports, while still growing, face headwinds from slowing global demand. The trade surplus that once supported the ringgit is narrowing.
The ringgit did gain against other currencies. It rose 0.61% against the pound. It strengthened against the euro. It added 0.12% against the Singapore dollar. Those moves were small. They were overshadowed by the drop against the greenback. The US dollar is the world’s reserve currency. It is the benchmark. That is the number that matters.
For Malaysian households, the stakes are concrete. A ringgit at 4.50 means everything priced in dollars costs more. Imported electronics. Medical equipment. International travel. Online subscriptions. The list is long. For businesses that borrow in dollars, the burden of repayment just got heavier. For exporters, there is a silver lining — their goods are cheaper abroad. But the overall picture is one of pressure, not opportunity.
Wednesday’s session ended with the market up and the currency down. One number moved in the right direction. The other hit a 24-year low. The divergence is real. It is not sustainable.
