Kuala Lumpur: Bank Negara Malaysia’s (BNM) international reserves increased by US$0.9 billion in May 2025, buoyed by sustained foreign capital inflows, with ringgit reserves reaching a nine-month high, according to Kenanga Investment Bank (IB) Bhd. In a recent statement, the investment bank reported that the central bank’s reserves stood at US$119.6 billion as of May 30, 2025, marking a 0.8 percent month-on-month increase.
According to BERNAMA News Agency, Kenanga IB stated that the reserves remained adequate to cover 5.0 months of imports, with the reserves-to-short-term external debt ratio maintaining at 0.9. The investment bank highlighted that the rise was driven by a buildup in foreign exchange (FX) reserves, which climbed by US$0.9 billion (+0.8 percent m-o-m) to US$106.4 billion, supported by continued net inflows into Malaysian assets. Notably, BNM’s net FX reserves edged up to US$67.4 billion in April, as short positions fell to a 14-month low.
Other reserve assets saw a marginal increase of US$0.03 billion (+1.2 percent m-o-m), while gold, International Monetary Fund reserve position, and Special Drawing Rights remained broadly unchanged. In ringgit terms, the reserves rose by RM3.7 billion (+0.7 percent m-o-m) to RM530.0 billion in May, the highest level since August 2024. The ringgit strengthened significantly in May, trading within a 4.20 to 4.32 range per US dollar and averaging 4.27, driven by strong portfolio inflows as foreign investors reduced US dollar exposure amid shifting global risks.
Kenanga IB noted that tentative progress in US-China trade relations and a more conciliatory tone from US President Donald Trump towards the European Union contributed to stabilizing the US Dollar Index (DXY). However, persistent US fiscal concerns kept the risk premium on US assets elevated, impacting the US dollar and boosting emerging market currencies. BNM is expected to maintain its policy stance in the near term, supported by stable macroeconomic fundamentals.
While the consensus leans towards two rate cuts in the second half of 2025, Kenanga IB anticipates BNM to keep the Overnight Policy Rate (OPR) unchanged at 3.00 percent for now. Core inflation has remained above its 1.8 percent long-term average over the past three months, indicating steady domestic demand despite lower headline inflation. Although GDP growth slowed to 4.4 percent in the first quarter of 2025, March data showed a robust 6.0 percent year-on-year expansion, reflecting underlying economic strength.
Kenanga IB remains cautiously optimistic for the second half of 2025, acknowledging ongoing trade tensions as a potential risk. Recent signs of easing tensions, particularly between the US and China, may help limit downside risks. The bank maintained its year-end US dollar-ringgit forecast at 4.08, supported by data showing a US$37.0 billion net divestment from US equities by foreign investors in May, reinforcing the broader de-dollarization trend. Despite trade policy uncertainty, Malaysia’s macroeconomic resilience and renewed foreign interest in local assets underpin a positive outlook for the ringgit.