SINGAPORE: Malaysia’s currency reached another all-time low against the strong Singapore dollar at 9:00 on Wednesday morning (Feb 21), falling to MYR 3.5725 to SGD 1. The exchange rate had been at MYR 3.56 to SGD 1 the previous day.
Whether the ringgit, which has weakened by around 2 per cent against the Sing dollar since the beginning of the year, will continue to fall is anyone’s guess.
Dr Carmelo Ferlito, the chief executive officer for the Center for Market Education (CME), spoke to The Business Times, however, to help explain the fall of the ringgit, which began by May last year, when the exchange rate was at S$1 to RM3.41.
The ringgit was Asia’s worst-performing currency for 2023, partly due to the effects of the COVID-19 pandemic and the poor economy of China, Malaysia’s biggest partner in trade.
Read also: SG dollar at record high against MY ringgit; S$1 to RM3.41
Dr Ferlito explained that the Singapore dollar followed suit when the US Federal Reserve started raising interest rates, eventually making Singapore more attractive as a destination for capital than Malaysia.
Secondly, he cited the role of Singapore’s currency in the region. Characterizing it as “as a reserve of value compared to other currencies,” Dr Ferlito added that in times of uncertainty—as what is occurring around the globe at present—means a high demand for the Singapore dollar.
“The general climate of uncertainty favours currencies which are recognised as reserves of value. Worldwide is the US dollar, while regionally, the role is played by the Singapore dollar,” says The Business Times.
The third reason Dr Ferlito gave for the sustained fall of the ringgit is Malaysia’s unclear policy direction.
He is quoted as saying that despite the “lofty plans under the 12th Malaysian Plan,” actual implementation in terms of business-friendly regulations or subsidy rationalisation, both of which would boost the economy, has lagged behind.
He also said that “essential reforms, such as the implementation of business-friendly regulations or the streamlining of subsidies, continue to be postponed.”
When the exchange rate between the Singapore dollar and the ringgit reached SGD1 = MYR3.56 on Feb 20, Mr Tan Cheng Wen, the vice president of Tradeview Capital Sdn Bhd, told The Business Times:
“Investors are closely monitoring the situation for further developments in the coming weeks.” /TISG
Read also: Singaporeans flock to Malaysia for shopping as ringgit hits another low
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