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Period : 1st Jan 2020– 12th Aug 2022
Date : 13th Aug 2022
Researcher : Esther Low
Source : Currency Exchange https://www.investing.com/currencies/
USD/MYR
The USD has strengthened rapidly against the Ringgit since the beginning of April 22 due to rising US treasury yields and shaky global risk sentiments arising from global inflation, slowdown in China’s economy, and geopolitical tensions between Russia and US as well as China and US. From 2020 to Aug 2022, the USD has appreciated from USD 1 = MYR 4.09 to MYR 4.46 (up by 9%).
The positive side of a stronger USD would be the higher purchasing power of the dollar, buyers in the US may find it an attractive reason to import more products or stocks from other Asian countries and Malaysia. The stronger USD would also help Malaysia push export value for natural gas and petroleum chemicals.
The current traded range for the dollar/ringgit is the 4.44 and 4.46 levels, the last time it the currency traded these ranges was in 2017. The Ringgit however is expected to trade stronger against the USD due to improving inflation data in the US, strong economic fundamentals such as firm domestic demand and elevated commodity prices for Malaysia. However the Ringgit’s performance against the other regional currency remains mixed.
CNY/MYR
After a momentarily strengthening of the Ringgit in May 22, the Chinese Yuan has been trading relatively flat at MYR0.66 to 1 CNY. Overall though, for the period of Jan 2020 to Aug 22, the Ringgit has weakened against the Yuan by 11.9%. As China is an important trading partner to most of the Asian countries, political and economic disruptions in the country will usually trigger ripple effects for the Asian basket of currencies. The sudden depreciation of the Yuan was due to strict lockdowns in Shanghai at the end of February 22 and the contraction in Chinese factory activity reported in July.
THB/MYR
Meanwhile the Ringgit has overall remained strong against the Thai Baht, however this could likely
change as the Thai Baht has strengthened sharply ahead of the potential hike in interest rates by the
Thai central bank. In the past two weeks (from 26/07 – 11/08) the Thai Baht has strengthened by 4%.
SGD/MYR
Against its southern neighbor, the Ringgit continued to weaken against the SGD (-4.2%
2022 YTD). The SGD is now trading at an all-time high of 1SGD = MYR 3.2387 as of 12th Aug
22. According to an interview with Sunway University economics professor Yeah Kim Leng,
the SGD has reached new highs due to the country’s monetary policy which manages the
exchange rate and allowing interest rates to adjust freely with international rules. In
contrast to this, Malaysia’s interest rate adjustments are more gradual than international
rates.
The weakening of the Ringgit against various key currencies would push export values up
and attract foreign investors to consider investing or acquiring assets here however it
would also mean higher import prices that will burden consumers and importers in the
country. Expensive imports of raw materials and goods will raise production costs, in
addition to that debt servicing burden will increase for importers who needs foreign
currency loans.