Malaysian ringgit hits highest since 2018 on AI, growth optimism

[MANILA] The Malaysian ringgit rose to the strongest level in more than seven years, buoyed by optimism over the country’s ties to the artificial intelligence (AI) supply chain and the nation’s growth outlook.

The currency appreciated as much as 0.8 per cent to 3.9750 per US dollar on Monday (Jan 26), the strongest since June 2018. Gama Asset Management sees the ringgit rising to 3.9 per US dollar this quarter.

Malaysia’s growth momentum is expected to continue this year, supported by resilient domestic demand and likely strong tourist arrivals. Rapid expansion of the data-centre sector is also opening new opportunities and drawing in investments.

T Rowe Price is most constructive over the ringgit within the emerging-Asia FX space, given that it’s a “destination for data centres with ample energy resources and is doing well in terms of tourism”, said Leonard Kwan, a fixed-income fund manager in Hong Kong.

The ringgit is Asia’s top-performing currency so far in January, following two years of outperformance in the region. It has already surpassed analysts’ projections for the first quarter.

Tech exports, foreign direct investment and Bank Negara Malaysia keeping rates unchanged this year would help the ringgit outperform South-east Asian peers again this year, Goldman Sachs strategists, including Danny Suwanapruti, wrote in a note on Saturday.

SEE ALSO

AI boosts emerging Asian currencies, but policy and fiscal worries keep markets cautious: BNP Paribas

Malaysia’s strong ringgit squeezes export reliant glove makers

Malaysia’s Khazanah to steer more capital to power grids and chip firms, its chief says in Davos

Ringgit’s outperformance set to extend next year on AI boost

More

DECODING ASIA

Navigate Asia in
a new global order

Get the insights delivered to your inbox.

The return of foreign investors to local assets is also supporting demand for the currency. Global funds bought US$256 million of local stocks on a net basis this month to Friday, helping to lift the benchmark FTSE Bursa Malaysia KLCI Index to a seven-year high.

The central bank’s likely hold on interest rates to 2027, alongside expectations for continued Federal Reserve easing, may narrow the US rate advantage over Malaysia. Bank Negara Malaysia kept rates unchanged last week.

“AI and export demand is leading to strength in the Malaysian ringgit,” said Jeff Ng, head of Asia macro strategy at Sumitomo in Singapore. “A neutral to even hawkish central bank may support the ringgit.” BLOOMBERG