Malaysian Ringgit: Strong Trade Supports Malaysian Ringgit - Commerzbank

Malaysia's July exports rose 38.0% year-on-year, marking the fourth consecutive month of double-digit growth driven by electronics and machinery exports, providing fundamental support for the ringgit exchange rate. Commerzbank analyst Moses Lim noted that robust shipments to the U.S. and Chinese markets, along with the AI-driven electronics cycle, are the main drivers of the strong export growth.

**Export Structure Shows Resilience in External Demand**

Looking at the export structure, electronics and machinery are the main contributors, with shipments to the U.S. and China remaining strong. Commerzbank emphasized that external demand remains resilient, with the AI-driven electronics cycle providing additional momentum for exports. This performance extends the export improvement trend seen since the start of the year, following January's 19.6% year-on-year export growth, driven primarily by electronics and optical equipment.

**Ringgit Gains Dual Support from Trade and Capital Flows**

Strong export growth supports the ringgit. Commerzbank previously noted that foreign portfolio inflows have turned strongly positive, with the U.S. dollar falling against the ringgit on the relevant trading day and over the week, and the ringgit up 4% against the dollar year-to-date. As a net crude oil exporter, Malaysia's relatively stable position also helps mitigate regional contagion risks, although imported petroleum products remain a vulnerability.

**Focus on Sustainability of External Demand**

Commerzbank believes that demand for technology products from major trading partners is broadly strong, which should continue to support regional currencies. For Malaysia, if the AI-driven electronics cycle persists, the strong export growth trend may remain supported. However, attention should be paid to potential disruptions to capital flows from changes in the global trade environment and rising political risks.