Exporters' increased dollar conversions support Malaysia's ringgit outlook

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Dollar conversions support ringgit

Highlights

Malaysia's foreign currency deposits fell 8.6% to RM308 billion (U.S.$75.5 billion) in August, signalling increased conversion of export proceeds into ringgit.
BNP Paribas SA expects the ringgit to strengthen to 3.90 against the dollar by June 2027, driven by corporate conversion flows and foreign direct investment inflows.
Malaysia's exports surged 45% in August from a year earlier, supporting the ringgit's 1.5% gain and making it the second-best-performing currency in Southeast Asia this year.

This article was translated from the original. Read the original version by our correspondent here.

Corporate conversion flows and foreign deposit signals

As reported by The Edge Malaysia, analysts see Malaysian exporters increasingly converting their foreign currency earnings into ringgit, a trend that could strengthen the local exchange rate in the coming months.

Recent central bank data show that Malaysia's foreign currency deposits fell 8.6% to RM308 billion, equivalent to U.S.$75.5 billion, in August, marking the sharpest monthly decline since 2010. The drop suggests that exporters benefiting from semiconductor shipments may be converting those proceeds into ringgit.

Although September trade figures are due to be released next week, BNP Paribas SA expects ongoing corporate conversions to continue supporting the ringgit. The bank also expects the combination of this momentum, strong economic fundamentals and foreign direct investment inflows to help lift the ringgit to 3.90 against the dollar by June 2027, from around 4.08 currently.

Parisha Saimbi, the bank's emerging markets Asia foreign exchange and rates strategist, said expectations are for increased corporate conversion flows from onshore exporters seeking to reduce rising foreign exchange exposure, as well as from foreign direct investment inflows including data centre construction.

Policy support and impact on currency markets

Malaysia continues to attract foreign investment as it emerges as a key Asian hub for semiconductor manufacturing and data centres. Malaysia's exports rose 45% in August from a year earlier, matching the growth recorded in June, which was the fastest pace since August 2022.

These developments supported the ringgit, which gained 1.5% against the dollar in August. Although the currency surrendered some of those gains in the following month following renewed dollar strength, the ringgit remains the second-best-performing currency in Southeast Asia this year after the Singapore dollar.

Official efforts have also reinforced these market flows. Bank Negara Malaysia reiterated last month that it continues to encourage government-linked companies and private firms to repatriate and convert foreign currency earnings, an approach that mirrors similar measures in South Korea before the won began to recover.

Khoon Goh, head of Asia research at Australia and New Zealand Banking Group, said that while there are no official data on Malaysian exporters' conversion of foreign currency proceeds into ringgit, the size of business foreign currency deposits held by commercial banks provides an indication of the trend. According to him, the decline in business foreign currency deposits since July may signal increased conversions, and if the trend becomes more pronounced, it should support the ringgit, although portfolio flows also remain an important driver.

Data centre investment in Malaysia has come into focus after we previously reported the approval of 27 data centre projects under the data centre task force through July 2026, with estimated investment of RM225.97 billion concentrated in Johor, Selangor and Negeri Sembilan. The article also highlighted the impact on the high-skilled job market, a minimum local content requirement of 30%, and regular monitoring of project implementation—factors that help explain why the sector is viewed as a catalyst for foreign direct investment inflows.

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