“Private investment opportunities remain relatively limited compared to developed economies such as the US and Singapore,” said Mr Hafidzi. He noted that Malaysia’s exports had contracted 1.8 per cent year on year in the first quarter of 2023, and that this could largely be attributed to the decline in exports to China.ĭomestically, Mr Hafidzi posited that Malaysia’s relatively weaker investment opportunities and impending structural reforms have held back the ringgit’s value. “Given that China is one of Malaysia’s largest trading partners, China’s economic recovery is important for the value of (the ringgit),” said Mr Hafidzi. Mr Hafidzi Razali, a senior analyst with strategic advisory firm Bower Group Asia, added the weaker ringgit recently can be attributed to China’s ongoing economic recovery. However, it has since depreciated due to external factors such as the (US Federal Reserve’s) highly aggressive interest rate hikes, the US banking crisis and geopolitical uncertainties,” said Mr Afiq Asyraf. “In November, the ringgit strengthened primarily due to the semblance of political stability post-election. He noted that predictably, the ringgit has not seen similar gains since. The currency had surged by 1.8 per cent on the day of Mr Anwar’s appointment on Nov 24 - the largest single-day gain since March 2016. “We think that this framework naturally provides the Singapore dollar with some shelter from bouts of US dollar strength which is what is happening now,” said Mr Saktiandi. Meanwhile, he explained that the Monetary Authority of Singapore (MAS) monetary policy framework is exchange rate based and is currently set to be on an appreciating path against an undisclosed basket of currencies. Mr Saktiandi explained that Malaysia has an “explicit interest rate policy” set by BNM and as such there is more pressure on the ringgit from the “perspective of a widening yield differential”. Generally, when the yield differential widens in favour of a certain currency, that currency will appreciate against other currencies. Consequently, there is less pressure in terms of yield differentials on the Singapore dollar,” said Mr Saktiandi.Ī yield differential is the spread between yields on differing debt instruments of varying maturities, credit ratings, issuers, or risk levels. “As there is no explicit interest rate policy in Singapore, interest rates are market dependent and highly correlated to US interest rates. The US dollar's recent momentum has been driven by raised expectations that the Federal Reserve will have to keep interest rates higher for longer to subdue inflation. Maybank chief forex strategist Saktiandi Supaat told CNA that a key factor why the Singapore dollar “has been more resilient” than the Malaysian ringgit in the recent bout of strengthening of the US dollar is because both countries have different approaches in interest rate policies. The ringgit, which has lost 4.3 per cent so far this year against the US dollar, on Friday hit its lowest level against the greenback since last November before reversing course to end 0.6 per cent higher.ĬNA spoke to analysts on the factors behind the ringgit’s depreciation against the Singapore dollar and what might lie ahead for the value of both currencies. In a statement released on Friday, Malaysia’s central bank Bank Negara Malaysia (BNM) said the recent weakness in the ringgit can be attributed to external developments such as the US debt ceiling impasse and “episodes of stress” in the US and European banking sectors. The value is up 6.16 per cent from about 3.20 a year ago, and up 4.15 per cent since the start of 2023. KUALA LUMPUR: Last Wednesday (May 24), the Singapore dollar broke its record against the Malaysian ringgit as it touched 3.4102 according to Bloomberg data.
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