analysis employs the Augmented Dickey-Fuller (ADF) unit root test to examine whether the exchange rates

follow a random walk process, thereby testing the validity of the weak-form EMH across three distinct periods:

pre-, during, and post-COVID-19. The findings confirm that all bilateral exchange rate series are integrated of

order one, I(1), and are therefore consistent with the weak-form EMH. They show that all bilateral exchange rate

series are non-stationary at level but stationary after first differencing. This suggests that ASEAN foreign

exchange markets are generally efficient and that historical exchange rate data cannot forecast future movements.

However, due to increased uncertainty and decreased market stability, efficiency momentarily declined during

the COVID-19 pandemic, especially for MYR/Philippines and MYR/Brunei. As exchange rate volatility returned

to normal, post-pandemic results indicate a partial recovery in efficiency. The results show how ASEAN foreign

exchange markets are becoming more resilient and integrated, but they also stress how crucial transparent

between two currencies, which determines how much one currency is to be exchanged for a unit of another

currency. Exchange rates apply to most countries, especially open economies that conduct international trade,

both imports and exports. When the domestic currency appreciates, imports become cheaper, and exports become

more expensive. Conversely, when the domestic currency depreciates, imports become more expensive, and

exports become cheaper. Thus, the exchange rate is essential in affecting the relative price levels of domestic and

foreign goods and services. Therefore, the changes in exchange rate affect international trade. This justifies the

importance of exchange rates in terms of international trade. Besides that, exchange rates also affect capital flows.

When the domestic currency has a large appreciation, it may reduce capital inflows in the form of foreign direct

investments because the prices of domestic assets increase. It makes the foreign investments become more

expensive and less attractive to foreign investors. Capital inflows may increase if the domestic assets become

past by Hamilton (2018) that a country’s international trade and capital flows were affected by exchange rates.

The market of foreign exchange needs to be informationally efficient to ensure exchange rates are reflecting

information quickly and sufficiently, the market is fairer, and the market is less risky. All these criteria will support

international trade and capital flows, and they are very relevant to a free trade area. Since its establishment, the

ASEAN Free Trade Area (AFTA) has been successfully reducing tariffs in the international trade among its

member countries (Sukegawa, 2021). Meantime, it is believed that the ASEAN international trade will be

increased if the exchange rates among the ASEAN countries are efficient. The informational efficiency of the

Malaysian Ringgit against the ASEAN currencies' exchange rates has not drawn much attention in research so

far. It is crucial to investigate this topic to strengthen the international trade and capital flows between Malaysia

and ASEAN countries. This research seeks to answer the question of whether Malaysia is benefiting from the

Ringgit, the Singapore Dollar, the Indonesian Rupiah, the Thai Baht, the Philippine Peso, the Vietnamese Dong,

the Brunei Dollar, the Lao Kip, the Myanmar Kyat, and the Cambodian Riel. This research only selected the

currencies of Malaysia, Brunei, Singapore, Indonesia, Thailand, and the Philippines because these countries are

a complete free trade area. AFTA was first established by signing the agreement in 1992 by these six ASEAN

countries. There is strong reason to study this topic because the informational efficiency of the Malaysian Ringgit

against the selected ASEAN currencies' exchange rates is desired for international trade and capital flows, but it

is yet to be sufficiently explored. If the market is informationally efficient, there are no consistent abnormal

returns to be earned from trading the currencies based on existing prediction patterns (Fama, 1970; Fama, 1991).

Informational efficiency is important because it means prices will reflect information quickly and sufficiently,

and therefore resources will be allocated efficiently, the market will be fairer, and it will be less risky for traders

The efficiency of foreign exchange markets in the Asia-Pacific region has attracted significant scholarly attention,

with findings consistently demonstrating that market efficiency varies across regimes, time periods, and levels of

financial development. Ahmad et al. (2012) examined twelve Asia-Pacific currencies and found that efficiency is

closely linked to the type of exchange rate regime and the nature of financial shocks. Their results indicated that

freely floating exchange rate systems were more resilient in processing new information compared to managed

float regimes, where official intervention and capital controls tend to delay market adjustments. The study also

concluded that the 1997 Asian Financial Crisis disrupted market efficiency more severely than the 2008 Global

Financial Crisis, underscoring that region-specific financial turmoil can exert a deeper and more prolonged

influence on informational efficiency.

sensitive to macro-financial shocks. Examining both developed and emerging markets, Yamani found that

efficiency tended to weaken during crisis periods, reflecting temporary distortions in information flows and

market expectations. In a related study, the International Monetary Fund (2016) analyzed the behavior of

ASEAN-5 exchange rates using structural-break and nonlinear unit root tests. The findings indicated that

exchange rate persistence increased following major policy shifts and crises, suggesting that market efficiency

deteriorates in the presence of structural changes, such as capital account liberalization, policy realignment, or

exchange rate interventions. In particular, the Malaysian Ringgit and Indonesian Rupiah exhibited heightened

persistence during crisis episodes, implying slower adjustment to new information.

The outbreak of the COVID-19 pandemic renewed academic interest in understanding how global disruptions

heighten regional interdependence, leading to a temporary convergence in currency movements. Similarly,

Kumar and Pathak (2025) found that the pandemic weakened the turn-of-the-month effect in cryptocurrency

markets, confirming that informational efficiency can deteriorate even in highly liquid digital markets under

conditions of systemic uncertainty.

Taken together, these studies provide converging evidence that foreign exchange market efficiency is dynamic

rather than absolute, fluctuating in response to structural and cyclical factors such as exchange rate regimes,

capital market depth, and global shocks. They also highlight a methodological gap in the existing literature. Most

studies assess efficiency using USD-denominated exchange rates, which, while useful for capturing global

dynamics, obscure bilateral intra-ASEAN relationships that are increasingly relevant to regional financial

to 2023 and segmenting it into pre-, during-, and post-COVID-19 phases, the analysis provides a more granular

view of how informational efficiency evolves across distinct economic environments. This approach allows for

a clearer understanding of Malaysia’s position within the ASEAN currency network and the degree to which

regional monetary linkages influence the Ringgit’s efficiency. In doing so, the study complements earlier regime-

and crisis-based findings (Ahmad et al., 2012; Putra et al., 2016; IMF, 2016; Yamani, 2021;

Azzam et al., 2023; Shahrier et al., 2022) and addresses a key gap in the literature concerning intra-ASEAN

exchange rate dynamics and their implications for sustained financial integration in the post-pandemic era.

the Malaysian Ringgit (MYR) in relation to the selected ASEAN currencies are presented in this section.

−0.732

−7.543***

Non-stationary at level, stationary after

differencing

−0.416

−14.255***

Non-stationary at level, stationary after

differencing

Note: ***,**,* represents statistical significance at 1%, 5%, and 10* level, respectively.

During the pre-pandemic era in Table 2, all bilateral exchange rate series between the Malaysian Ringgit and the

selected ASEAN currencies were non-stationary at level but became stationary after first differencing. According

to the results of the ADF test, all series are integrated of order one, or I(1), which is in line with the properties of

a random walk process.

By suggesting that historical data incorporated into exchange rate movements could not be used to predict future

changes in the bilateral exchange rates, this finding lends credence to the weak-form EMH. The findings are

consistent with those of Lee et al. (2011), who discovered comparable proof of weak-form efficiency in the

foreign exchange markets of the ASEAN-5 in relation to the USD. It also supports the theoretical claim made by

Fama (1970, 1991) that market prices efficiently take historical information into account.

−0.882

−0.907

−3.031**

−2.051

Note: ***,**,* represents statistical significance at 1%, 5%, and 10* level, respectively.

Table 3 illustrates the brief departure from market efficiency during the COVID-19 pandemic, which is

characterized by increased volatility and asymmetric behavior across currencies. Other bilateral rates, such as

efficiency of 26 developed and emerging markets declined as a result of increased volatility and abrupt changes

while others maintained it.

−1.023

exchange rates MYR/IDR, MYR/SGD, and MYR/THB all returned to I(1) patterns, as shown in Table 4,

indicating a return to random walk dynamics that is in line with the weak-form EMH. Specifically, the

MYR/THB rate indicated a slight realignment following the 2020–2021 turbulence, with weak evidence of mean

reversion as indicated by the stationarity at level I(0).

In contrast, MYR/PHP and MYR/BND remained non-stationary at level but stationary following initial

differencing, suggesting that efficiency was mostly restored but still a little less stable than it was prior to the

pandemic. The reopening of borders, inflation stabilization, and financial confidence recovery have all

contributed to the gradual normalization of trade, capital flows, and policy coordination within ASEAN, which

is reflected in these findings. The overall return to efficiency is consistent with the findings of Putra et al. (2016),

who highlighted the ASEAN foreign exchange markets' ability to bounce back from previous global shocks like

Market Hypothesis (EMH), all series were found to be non-stationary at level but stationary after first

differencing. This finding implies that exchange rate changes are unpredictable and that past movements do not

policy frameworks and robust market mechanisms. As evidenced by the partial recovery seen in the post-

COVID-19 period (2022–2023), the normalization of trade flows and macroeconomic policies appears to have

helped ASEAN foreign exchange markets regain stability and resume effective informationgathering.

From a policy perspective, the results highlight how crucial it is for monetary and exchange rate policies in

ASEAN member states to be transparent, consistent, and well-coordinated. Policymakers should strengthen

macroeconomic surveillance systems, improve exchange rate reporting, and enhance central bank communication

strategies to ensure the rapid and reliable dissemination of information. Greater policy clarity reduces speculative

pressures and promotes confidence in regional currency markets. At the institutional level, Malaysia and its

ASEAN partners should deepen regional cooperation through platforms such as the ASEAN+3 Macroeconomic

financial markets. This includes encouraging wider participation in forward, futures, and swap markets,

expanding access to currency-hedging instruments, and developing interoperable digital trading and settlement

firms’ ability to manage currency risk in cross-border transactions. At the same time, regional authorities should

advance local currency settlement (LCS) initiatives and explore the creation of a regional digital currency

settlement system to gradually lessen dependence on the U.S. dollar. These initiatives, supported by digital

payment technologies and regulatory harmonization, would promote more efficient intra-ASEAN trade and

investment flows while enhancing financial autonomy. Taken together, these policy and market-level reforms

would not only improve exchange rate efficiency but also build a more resilient, interconnected, and

self-sustaining regional monetary architecture for the post-pandemic era.

unit root. Journal of American Statistical Association, 74, 427-431.

Finance, 25(2), 383-417.

Bank of Australia.

from Structural Break and Nonlinear Unit Root Tests (IMF Working Paper No. 16/165). Washington,

D.C.: IMF.