KUALA LUMPUR, May 22 — The ringgit could post the strongest gains in Southeast Asia if exporters convert their foreign earnings into local currency, driven by the country’s substantial foreign-currency deposits.
Foreign deposits across Malaysia, Thailand, the Philippines and Indonesia have surged to US$62.2 billion (RM265 billion) as of March, approaching record levels set the previous month, Bloomberg reported.
Malaysia accounts for nearly all of this growth, with its foreign deposit expansion outpacing regional peers significantly.
The focus on foreign deposits has intensified as investors monitor potential currency conversions amid growing scepticism toward the US dollar due to policy and economic concerns.
Taiwan’s exporters demonstrated this trend earlier this month when heavy foreign-exchange sales helped their local dollar achieve its largest single-day gain since 1988.
“Acceleration in broad dollar softness may risk triggering exporters rushing to sell their dollar holdings and that cycle, if it happens, it may result in excessive local currency strength,” said Christopher Wong, a senior foreign-exchange strategist at Oversea-Chinese Banking Corp.
Major Southeast Asian currencies have already rallied to yearly highs as the dollar weakened and US-China trade tensions temporarily eased.
While excessive currency appreciation might concern local authorities, moderate gains could enable further interest-rate cuts by reducing depreciation pressure.
The Malaysian ringgit has emerged as the second-biggest gainer among emerging market currencies in Southeast Asia this year, rising 5 per cent.
Malaysian policymakers earlier urged exporters to convert earnings into ringgit more promptly to support the local currency.
Malaysia’s foreign deposits reached 10.6 per cent of total deposits by March, standing 1.6 standard deviations above the five-year average.
Goldman Sachs strategists recommend that Asian exporters continue converting dollars to local currencies after years of accumulating dollar deposits.
