The ringgit strengthened 6 per cent against the Singapore dollar in three months, as it went from 3.4762 to 3.2584 during the June 28 to Sep. 20 period, and is set for its best quarter in 50 years, Bloomberg reported.

Back in August, it was already the top-performing currency in Asia.

The ringgit is currently trading at 4.208 ringgit to US$1, its strongest performance thus far in 2024.

The last time the currency performed this well was back in January 2023.

The ringgit's performance against the Singapore dollar is its best so far since February 2023:

There are a few possible reasons why the Malaysian ringgit is strengthening against the Singapore dollar.

U.S. interest rate cuts

One reason for the ringgit's strong performance against the U.S. dollar could be the recent interest rate cut by the U.S. Federal Reserve on Sep. 19.

The interest rate cut led to the U.S. dollar slipping, Reuters reported on Sep. 20.

All the same, the ringgit has been steadily strengthening against the U.S. dollar since January 2024, well before the interest rate cut took place.

Growing investor confidence

Some analysts think growing investor confidence in the Malaysian economy is bolstering the ringgit.

The cutting of diesel subsidies back in May this year, projected to save up to RM4 billion (S$1.23 billion), may have assured investors that the government is committed to reducing its deficit.

Some analysts point to Malaysia's Energy Transition Roadmap and New Industrial Master Plan 2030 as having brought investments into Malaysian companies, thereby strengthening the ringgit.

The continued stability of Malaysian prime minister Anwar Ibrahim's coalition government, currently in its second year of governance, might have also allayed fears of political change, thereby helping to prop up the currency.

Effects of a strengthening ringgit

The ringgit's rally will make Malaysian exporters less attractive to buyers.

All the same, Malaysian importers that trade in U.S. dollars, or buy components for products in U.S. dollars, stand to benefit from the ringgit's rally.

Top photo from Canva.