Malaysia’s labour market improved in 4Q25. The unemployment rate fell to 2.9% from 3.0% in 3Q25, while the participation rate stayed at 70.9%. The 2.9% unemployment rate was the first time it fell below 3.0% since 4Q14. This points to stronger labour conditions at the end of 2025. For 2026, unemployment is forecast to stay at 2.9%, which is still below 3.0%. The 2025 unemployment rate is also reported at 2.9%. Factors that may support employment in 2026 include domestic growth, job measures in Budget 2026, ongoing national initiatives, tourism, and AI-related demand. The article says it was produced with help from an AI tool and reviewed by an editor. Given the strong labour market in late 2025, the outlook for the ringgit looks stable. Unemployment fell to 2.9%, the lowest level in more than a decade, and this is expected to continue through 2026. This steady backdrop suggests less currency volatility in the near term. Recent data supports this view. January 2026 inflation was slightly higher than expected at 3.1%, driven by firm domestic demand. The latest trade data also showed a 15% year-on-year rise in semiconductor exports, which supports the idea that the AI upcycle is real and ongoing. Together, these signals point to a solid economy that can support the currency. For currency traders, this mix of stability and strength suggests a cautious, positive bias on the ringgit. Low-volatility strategies, such as selling out-of-the-money USD/MYR call options, may be worth considering in the coming weeks. Strong fundamentals reduce the risk of a sharp ringgit drop against the US dollar. This backdrop also matters for interest rates. A rate cut by Bank Negara Malaysia looks unlikely. The central bank kept its policy rate at 3.25% at its late-January meeting. With a tight labour market, the next move is more likely to be a hold, or possibly a hike. Traders may want to avoid positions that rely on near-term rate cuts. In late 2014, the last time unemployment was this low, growth depended heavily on commodity prices, which later fell sharply. Today’s picture looks more balanced. Growth is supported by a wider set of drivers, including national initiatives and a strong tourism rebound. This broader base suggests the current strength may be more resilient than it was a decade ago.

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