Malaysian exporters are likely increasing conversions of their foreign-currency earnings into the ringgit, which stands to boost the local exchange rate through the rest of the year, according to analysts. Malaysia's foreign-currency deposits fell 8.6% to 308 billion ringgit ($75.5 billion) in August, the sharpest monthly decline since 2010, according to central bank data. This drop indicates that exporters, benefiting from semiconductor shipments, may be converting those earnings into ringgit, as reported by Bloomberg.
BNP Paribas SA expects ongoing corporate conversions to support the ringgit, with the currency projected to reach 3.90 per dollar by June 2027 from around 4.08 currently. Malaysia's exports rose 45% in August from a year earlier, matching the growth seen in June, which was the fastest since August 2022. The ringgit rallied 1.5% against the dollar in August and remains Southeast Asia's best-performing currency this year behind the Singapore dollar, according to Bloomberg reports.
Foreign investments have poured into Malaysia, which has become a major Asian hub for semiconductor manufacturing and data centers. The country's economic fundamentals and foreign direct investment inflows are supporting the currency momentum. BNP Paribas strategist Parisha Saimbi expects corporate conversion flows to rise from onshore exporters seeking to reduce rising FX exposure and from foreign direct investment inflows such as data center construction, as reported by Bloomberg.
Bank Negara Malaysia reiterated last month that it continues to encourage state-linked and private firms to repatriate and convert foreign-currency income. This strategy mirrors a similar move in South Korea, where officials urged exporters to repatriate overseas funds before the won began to recover. With no official data on Malaysian exporter conversion of foreign currency proceeds into the ringgit, the size of business foreign-currency deposits held by commercial banks gives an indication of such trends, according to Khoon Goh, head of Asia research at Australia & New Zealand Banking Group, as reported by Bloomberg.
