Malaysian money ringgit banknote and coins

SINGAPORE: The Malaysian ringgit has hit its lowest point since 1998. The currency tumbled to below 4.8 against the US dollar, rattling markets and sparking concerns about the country’s economic health, The Edge Singapore reports.

Bank Negara Malaysia (BNM), the nation’s central bank, quickly responded, assuring the public that the current state of the ringgit doesn’t mirror the positive strides expected for the Malaysian economy in the near future.

Governor Abdul Rasheed Ghaffour of Bank Negara Malaysia pointed out, “BNM is of the view that the current level of the ringgit does not reflect the positive prospects of the Malaysian economy going forward.

The recent performance of the ringgit, similar to other regional currencies, has been influenced by external factors.”

But it’s not all doom and gloom. Abdul Rasheed highlighted a brighter outlook, citing a projected rebound in external demand and robust domestic spending driving forces behind the anticipated growth.

Recent data on exports and tourism offer glimmers of hope, with January’s 8.7% y-o-y growth in exports marking a significant turnaround after months of contraction.

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The tourism sector, in particular, has “recovered strongly,” with visitor numbers on track to surpass the 26 million count of the pre-pandemic levels.

Investment activities are also gaining momentum, with private and public sectors seeing increased project implementations.

According to Abdul Rasheed, “Reflecting these positive developments and the government’s commitment to implement structural reforms and the expected lowering of interest rates in advanced economies, most analysts are forecasting for the ringgit to appreciate this year.”

However, all eyes are now on the upcoming inflation data, slated for release on Friday, which could provide insights into BNM’s future monetary policy decisions.

Despite the current challenges, Malaysia’s second finance minister, Amir Hamzah Azizan, remains confident in the country’s economic fundamentals.

He ruled out the need to peg the currency to the dollar, underscoring Malaysia’s reserves, manageable debt exposure, and ample financial liquidity.

He said, “Today if we look at the reserve basis of the country, if we look at the debt exposure of the country, if we look at the financial liquidity that’s actually in the market, Malaysia doesn’t need to peg its currency.”

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Looking ahead, the ringgit’s fate hangs in the balance, with its trajectory largely dependent on global economic dynamics, particularly the performance of the US dollar.

Alvin Tan, FX strategy’s head of Asia at RBC Capital Markets in Singapore, said that while short-term prospects may see further depreciation, breaching the record low is unlikely, as the US dollar is “expected to wane.”

Nevertheless, Malaysia’s growth story is not without its stumbling blocks. Sluggish exports, coupled with weak manufacturing activity, pose challenges to the economy’s recovery.

The situation is mirrored in neighbouring Thailand, where growth figures have spurred calls for urgent monetary interventions. /TISG

Read also: Singapore dollar hits new high against ringgit, breaking through at one point to 3.559MYR per 1SGD

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