(Jan 26): 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% to 3.9750 per dollar on Monday, the strongest since June 2018. A strategist at Oversea-Chinese Banking Corp sees the ringgit potentially strengthening toward the 3.9650 level, supported by gains in the yuan and yen, while Gama Asset Management SA expects the currency to rise to 3.9 per 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.
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Tech exports, foreign direct investment and Bank Negara Malaysia keeping rates unchanged this year would help the ringgit outperform Southeast Asian peers again this year, Goldman Sachs strategists including Danny Suwanapruti wrote in a note on Saturday.
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 through 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 through 2027, alongside expectations for continued Federal Reserve easing, may narrow the US rate advantage over Malaysia. Bank Negara Malaysia kept rates unchanged last week.
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“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.”
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