I think everyone knows about the Ringgit reaching new lows versus S$ and US$ recently. Yes, in fact it is very near to the days when it was pegged to the US$ at US$1 to RM3.80 I remembered it clearly because it was then that I went for my studies in Bristol, UK. Two weeks after arriving, the exchange rate went up to £1 to RM8! My girlfriend then and my wife today were so reluctant to spend our money then. At that time, everything was bad. The whole banking industry was shaky and Bank Negara Malaysia forced the mergers to happen. Smaller ones were bought over by bigger ones and out of the 54 banks, in the end, there were just 10.
Today, the Ringgit is again reaching the level of the pegging. Many said that perhaps Ringgit may be pegged again. I do not believe any pegging would happen unless the economy spins into negative territory. As long as the economy continue to march forward, even with a lower projected growth, there are no immediate dangers. Yes, Fitch said that they are looking at us negatively and for this, let’s wait for their meeting end of June 2015.
Many also argued that 1MDB would cause the collapse of the economy. Based on the size of 1MDB versus its assets, it will not but it will drag down the confidence level due to the many uncertainties surrounding the controversy.
US$ strengthening is also one major reason why Ringgit continue to decline but please note that Ringgit is actually doing fine versus AUD$ and even Japanese Yen and Euro. In other words, Ringgit’s value of today was NOT like 1998 when Ringgit fell versus the world!
Oh yeah, let’s not just read comments from a non-economist like me. I am not even a qualified Accountant. Haha.
According to Saktiandi Supaat, the head of foreign exchange research at Malayan Banking Bhd in Singapore, “The rebound of the ringgit yesterday was in line with the movement of other regional currencies, as the US dollar retreated… this is because the greenback in general had overshot its long-term value over the last few days.”
According to a very capable central bank governor, Tan Sri Dr Zeti Akhtar Aziz said that the ringgit is definitely not reflective of the fundamentals of the Malaysian economy. The weakness of the Ringgit is likely to be temporary and fundamentals would support it again once the global uncertainties subsided.
Yes, some analysts projected the Ringgit to fall even below the level that it was pegged to. However, until today, there are no analysts no matter from local or foreign institutions which had predicted the collapse of the economy and as at today, 12 June 2015, Malaysia’s sovereign ratings are all under the Investment category for all three international rating agencies. Quoting a famous term, ‘Stay Calm, Carry On.’ Just remember to ensure you have enough to last 6 months should you suddenly lose your job. Other than that, if you invest objectively, everything should be okay in the short term. Yes, I continue to queue for some stocks which I like. Happy reading.
written on 12 June 2015
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