(Jan 26): The Malaysian ringgit rose to its strongest level in more than seven years, supported by connectivity with the artificial intelligence (AI) supply chain and optimism over the country’s growth prospects.
On Monday, the currency rose 0.8% to 3.9750 ringgit to the dollar, its highest since June 2018. Oversea-Chinese Bank strategists believe the ringgit could appreciate towards the 3.9650 ringgit level, supported by the appreciation of the renminbi and yen, while Gama Asset Management SA expects the ringgit to appreciate to 3.9 ringgit to the dollar this quarter.
Malaysia’s growth momentum is expected to continue this year, supported by strong domestic demand and likely strong tourist inflows. The rapid expansion of the data center sector is also creating new opportunities and attracting investment.
Hong Kong bond fund manager Leonard Kwan said T. Rowe Price was the most positive on the ringgit in emerging Asia currency markets, given that the ringgit is “a data center destination with abundant energy resources and is doing well on the tourism front.”
The ringgit continues to outperform in the region for the second consecutive year, making it Asia’s best-performing currency so far in January. It has already exceeded analysts’ expectations for the first quarter.
Goldman Sachs strategists including Danny Suwanapurthi said in a note on Saturday that the ringgit will continue to outperform Southeast Asian countries this year due to high-tech exports, foreign direct investment and Bank Negara Malaysia’s decision to keep interest rates on hold this year.
Foreign investors returning to domestic assets is also supporting demand for the currency. The Global Fund bought a net US$256 million (RM1.02 billion) of domestic stocks this month until Friday, helping push the benchmark FTSE Bursa Malaysia KLCI index to a seven-year high.
In addition to expectations for continued easing from the US Federal Reserve, the central bank is likely to keep interest rates on hold until 2027, potentially narrowing the US interest rate advantage over Malaysia. Bank Negara Malaysia kept interest rates unchanged last week.
“AI and export demand are leading to a strong Malaysian ringgit,” said Jeff Ng, head of Asia macro strategy at Sumitomo Corporation in Singapore. “There is a possibility that a neutral or hawkish central bank will support the ringgit.”
Uploaded by Chong Xia Lane
