KUALA LUMPUR: The Malaysian ringgit has emerged as one of the top performing currencies, strengthening by about 7.2% against the US dollar so far this year.
However, Fundsupermart Research said, the ringgit remained the most undervalued currency in Asean.
Jerry Lee Chee Yeong of Fundsupermart Research wrote in The Malaysian Reserve that a more hawkish central bank monetary policy next year was likely to provide a boost to the ringgit.
Foreign funds are likely to flow back to the local equity market once there is a clear indication regarding the next general election.
Lee said improving economic fundamentals and attractive valuation of the ringgit made local assets such as bonds and equities attractive to foreign investors.
He noted that Malaysia’s exports grew by double digits in the past 10 consecutive months supported by strong external demand for local electronic and electrical products and the higher crude oil price.
Due to the introduction of foreign exchange administration rules in late 2016 by Bank Negara Malaysia, the surge in exports has translated into a higher demand for the ringgit, as local exporters are required to change 75% of their exports proceeds into the local currency.
This, Lee said, could be the key driver behind the improving foreign exchange liquidity.
As aggregate world demand was likely to remain robust next year, the ringgit was likely to benefit, it added.