Oil, AI demand give ringgit room to rally, say strategists

The Malaysian ringgit may be set to rise as oil prices climb and the artificial intelligence sector booms, according to analysts. While the currency has slipped 1.2% in September, trailing regional peers, several banks predict a strengthening to around 4.03 per dollar by year-end. Sumitomo Mitsui Banking Corp and MUFG Bank both forecast a 4.0 level. The ringgit ended Friday 0.3% higher at 4.0738 per dollar.

Higher oil revenues for the energy-exporting nation and Malaysia's expanding role in AI's supply chain could bolster the currency's prospects. With political risk from state elections diminishing, strategists anticipate the ringgit to continue its upward trajectory toward the end of the year. Sumitomo Mitsui Banking Corp's Jeff Ng noted that Malaysia's overall fundamentals remain favorable, citing its energy and electronic exports, as well as links to the strengthening Chinese yuan.

Malaysia's exports have surged more than 35% in the first five months of 2025, primarily driven by shipments of electronic products, including semiconductors. The country has become one of the world's four largest net exporters of AI-related hardware, alongside South Korea, Taiwan, and Thailand, according to the International Monetary Fund. The country's electronics trade surplus is helping offset the increased cost of oil imports, MUFG Bank's Lloyd Chan explained.

With the ringgit's real effective exchange rate about 2% below its 20-year average, bond inflows could provide additional support. Export growth averaged 6.7% in 2025, according to MUFG Bank's Chan. The country's position as a top liquefied natural gas exporter also gives it an edge in weathering higher energy costs compared to some regional peers.

Goldman Sachs strategists, including Danny Suwanapruti, highlighted Malaysia's favorable terms-of-trade and AI investment as factors that could propel the currency's performance, recommending a long ringgit/baht trade.