Bank Negara Malaysia's (BNM) international reserves surged to $128.3 billion as of 27 February 2026, the highest in more than 11 years since August 2014.
The surge was driven by a strengthening of foreign currency holdings and a significant increase in gold reserves.
Kenanga Investment Bank Bhd (Kenanga IB) reported an increase of $1.4 billion or 1.1% compared to the previous month.
However, despite the increase in reserves, import coverage declined slightly to 4.7 months from 4.8 months in January.
The reserve-to-short-term external debt ratio remained at 0.9 times, indicating no change in short-term liquidity levels.
Foreign currency reserves continued to record month-on-month increases for 11 consecutive months, rising $1.2 billion (1.1%) to $112.5 billion despite facing net capital outflows.
In January, net foreign exchange reserves hit a 44-month high of $79.5 billion, reflecting a reduction in short-term capital outflows that had previously been a source of pressure.
Gold reserves recorded a remarkable increase of $200 million (3.7% month-on-month and 87.6% year-on-year) to a record $6.1 billion.
Kenanga IB attributed the increase to BNM’s gold purchases, which increased its holdings to 1.36 million pure troy ounces in January, the first time since October 2018.
Meanwhile, the ringgit continued to strengthen for four consecutive months, rising 3% in February after recording a 1.5% increase in January.
The average US dollar-ringgit exchange rate reached 3.91, reaching its best level since April 2018.
The weakness of the US dollar was the main driver of the ringgit’s strengthening. Investors increasingly chose to sell the US dollar despite the temporary increase, indicating that confidence in the US currency continued to decline.
Market sentiment was also affected by President Donald Trump's move to replace the tariff regime under the International Emergency Economic Powers Act (IEEPA) with a 15% surcharge, thus reducing the risk of more serious trade tensions.
Kenanga IB maintained its ringgit target at 3.95 by end-2026, but warned that the ringgit's movements would become increasingly volatile.
This follows the ongoing structural changes in the economy which they described as the process of 'decommoditization' of the ringgit, reflecting new challenges to the stability of the country's currency.
High reserves give BNM room to weather global tensions, but market volatility and economic structural changes demand a more aggressive and responsive strategy from the monetary authority.
