The Malaysian Ringgit (MYR) fell further against the Singapore Dollar (SGD) today (19 Feb), trading at RM3.556 to S$1 at 10.06am.
Source: XE.com
It was last reported less than two weeks ago that the SGD had risen to 3.55 against the MYR.
At the same time, the ringgit is 2% away from meeting its 1998 record low, when it slumped to 4.8850 against the US Dollar (USD).
It is currently sitting at RM4.783 to US$1.
The Ringgit’s deterioration has been attributed to a fall in exports as well as the continued strengthening of the USD.
The Ringgit slid to RM4.8850 against the USD back in 1998 during the Asian Financial Crisis, The Straits Times (ST) reported.
Since the start of 2024, the currency has already depreciated by 4% against the USD.
After it fell 6% against the SGD in 2023, the Ringgit has declined by yet another 2% in 2024.
In Oct 2023, the MYR hit 4.7958 against the USD — its lowest since 1998.
At the time, then-Malaysian Prime Minister Tun Mahathir Mohamad had pegged the value of the Ringgit to 3.80 to the USD to safeguard the local economy from the financial instability in the region.
While the pegging was removed in 2005 in favour of a managed float system, the former premier proposed for it to be reintroduced in September last year, according to Malay Mail.
Since then, economists have spoken out against the idea, noting that Malaysia is neither in an economic crisis nor experiencing a situation similar to the Asian Financial Crisis.
Malaysia, and by extension, the Southeast Asian (SEA) region, saw its exports decline for a 10th consecutive month in December.
This stems from China’s lacklustre economy, Bloomberg reported.
Furthermore, the USD has continued to strengthen, bolstered in part by a series of interest rate hikes in 2023.
On top of that, investors have held concerns over Malaysia’s political climate.
In recent months, current Prime Minister Anwar Ibrahim’s administration has been plagued by rumours of clashing parties and attempts to bring him down.
Despite the less-than-promising factors, analysts predict that the MYR will recover some ground by the end of 2024.
OCBC has forecast the currency’s return to RM4.60 to US$1.
Australian bank ANZ, meanwhile, predicts a rate of RM4.45 by year-end.
They expect Malaysia’s economic growth to gain momentum.
While it’s unlikely that the country will increase its interest rate, it could recover if the United States Federal Reserve cuts interest rates throughout 2024.
This will eventually “narrow the yield differentials” between the US and Malaysia, OCBC currency strategist Christopher Wong said.
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Featured image adapted from Gwengoat for Getty Images Signature and Sean Pavone Photo from Getty Images.
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