KUALA LUMPUR (Aug 2): Malaysian ringgit will continue to outperform regional currencies in the second half of this year backed by positive fundamentals, Standard Chartered (StanChart) said.

So far this year, the ringgit is the only major Asian currency that has appreciated against the US dollar. The government’s call for repatriation, conversion and hedging of foreign currency proceeds has been the trigger for the outperformance, StanChart noted.

However, the underlying fundamentals have also been helpful for the ringgit, the bank said. That includes low foreign positioning in Malaysia, high resident offshore positioning, and continued tourism recovery, it said.

Further, Bank Negara Malaysia (BNM) may also be the only central bank in the region that is more likely to raise than cut interest rates, StanChart flagged.

Over a one-month period, the ringgit has gained 4.44% to trade at 4.5135 against the US dollar. It has recovered 6.32% from the low of 4.7987 touched on Feb 20 this year.

Year to date, the ringgit is now up 1.81%. In comparison, the Indonesian rupiah is down 4.94%, followed by the Philippine peso, down 4.78%, Vietnamese dong, down 3.77%, Thai baht, down 3.59% and Singapore dollar, down 1%.

With the ringgit having recovered significantly in such a short period, StanChart cautioned that potential reserve rebuilding may moderate further rallies on a relative basis.

The bank also flagged that the US election outcome may also bring some risk to the ringgit, should there be any harsh tariff actions on China.

BNM has kept the policy rate unchanged for more than a year now since it was last raised in May 2023 by 25 basis points, drawing comfort from robust economic growth and manageable inflation pressure.

Malaysia’s economic growth accelerated faster than expected in the April-June quarter at 5.8% year-on-year, driven by consumer spending and exports, according to the official advance estimate released last month.

Inflation meanwhile remained steady at 2% year-on-year in June and came in below economist forecasts, even after the government implemented diesel subsidy retargeting.

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