The value of the Malaysian ringgit seemingly hangs in the balance, as it’s projected to weaken further against strong currencies like the US dollar (USD) and Singapore dollar (SGD).
Analysts projected that the ringgit might decline to RM5 against the USD in the next six months.
This means that we could also see the Malaysian currency reaching a new low against the SGD, between RM3.35 and RM3.45.
Analysts have attributed this strong likelihood to the Singapore dollar staying resilient while the ringgit is volatile.
According to The Straits Times (ST) on 1 Nov, the ringgit is set to depreciate as the USD strengthens drastically throughout the year. This is mainly due to the US Federal Reserve raising interest rates to curb inflation.
Source: Reuters
Economists and forex analysts have described the current monetary policy as “hawkish” in response to sky-high inflation.
As for the SGD, Maybank’s chief forex strategist Saktiandi Supaat said it is currently the most resilient Asian currency against the USD. This is largely due to the Monetary Authority of Singapore (MAS) tightening its monetary policy several times in the last 12 months.
Another differentiating factor is that while Malaysia’s monetary policy revolves around interest rates, Singapore relies on the exchange rate to ward off imported inflation concerns.
In mid-October, Bloomberg reported that the ringgit could depreciate further amid concerns that the upcoming General Election could reignite political risk.
In turn, this could spur the Malaysian government into pushing for a “deficit-busting” budget.
Singapore emerging markets FX strategist Galvin Chia told Bloomberg that the US dollar-ringgit exchange rate may hit 4.75 to 4.80 by end-2022.
True enough, the ringgit is now at 4.74 against the USD as of 2 Nov 2022.
Source: XE
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