Kuala Lumpur:The ringgit weakened against the US dollar on Tuesday due to a reduction in global artificial intelligence (AI)-related trading and investments. By 6 pm, the local currency fell to 4.0735/0775 compared to Monday's close of 4.0695/0735.

According to BERNAMA News Agency, SPI Asset Management managing partner Stephen Innes attributed the ringgit's decline to broader risk aversion as investors reduced their AI-related investments. Malaysia, a significant beneficiary of the global AI investment surge, particularly in its semiconductor and technology sectors, is now experiencing the downside as AI trade unwinds.

Innes noted that the ringgit faces pressure even when the US dollar weakens, due to the broader unwinding of the AI trade, which may continue to influence the currency in the near term. Bank Muamalat Malaysia Bhd chief economist Dr. Mohd Afzanizam Abdul Rashid mentioned that the ringgit traded in a narrow range against the US dollar amid concerns over a potential AI investment bubble, the approaching US midterm elections, and upcoming US jobs data.

Dr. Mohd Afzanizam highlighted mixed signals from Wall Street firms at a conference in Hong Kong, where some argued that AI infrastructure investments might be excessive, while others emphasized their economic benefits. He also pointed out that Brent crude oil prices rose by 1.94 percent to $106.80 per barrel, as market uncertainty persisted over the possibility of a renewed US attack on Iran following the US midterm elections.

Overall, market sentiments are cautious due to various uncertainties that could shift the balance of risk. Against major currencies, the ringgit showed mixed performance, strengthening slightly against the Japanese yen and euro but weakening against the British pound. The ringgit was mostly lower against ASEAN peers, except for a rise against the Singapore dollar.