Ringgit Set for Relief Rally on Oil Prices and AI Demand
The Malaysian ringgit may be on the verge of a rally as higher oil prices and growing demand for artificial intelligence (AI) components bolster its value. The currency has declined 1.2% in September, but MUFG Bank expects it to strengthen to 4.03 per dollar by year-end.
Sumitomo Mitsui Banking Corp sees the ringgit reaching a similar target of 4.0 per dollar. According to Jeff Ng, head of Asia macro strategy at Sumitomo Mitsui Banking Corp in Singapore, 'We could see a relief rally in the ringgit toward the year-end as macro environment concerns ease.'
The country's exports have surged more than 35% in each of the five months through August, driven by shipments of electronic products including semiconductors. Malaysia is now one of the world's four largest net exporters of AI-related hardware, alongside South Korea, Taiwan and Thailand.
Bond inflows may help support the ringgit, as its real effective exchange rate remains about 2% below its 20-year average. The central bank has turned slightly more hawkish, which 'the conditions are in place for ringgit to outperform,' according to Goldman Sachs Group Inc strategists.