RM has repeatedly hit a new low this week, analysts pointed out that the external situation is volatile and the direction of our policy is not clear. These are the key factors leading to depreciation, so although the RM is still at an undervalued level, in the short term it is expected to continue to be under pressure.
RM depreciated by 0.3% against the US dollar on Tuesday (20) to the 4.80 level mark, which remains lo today. RM against SGD, so far this year has depreciated by more than 2%, a few days ago, it again set a new record since the separation of Malaysia’s lowest level, a move to 3.57 level.
China General Social and Economic Research Center Executive Director Li Xingyu pointed out in an interview with the “China Newspaper”, that the United States economic data is still strong, the Federal Reserve is expected to delay the interest rate cuts, coupled with the market’s concern about China’s economic performance is not strong, are affecting the performance of emerging market currencies, Malaysia is no exception.
S$ fundamentals strong
“Overall, the US dollar remains strong and the SGD is weakening against the US dollar, but the SGD fundamentals are stronger so the depreciation will not be too big. However, the stronger US dollar is having a big impact on RM, so it is also widening the gap between RM and SGD.”
He said that Singapore’s policy and governance are strong, so naturally the currency will perform better.
In addition, the Centre for Market Education (CME) Chief Executive Officer Felito, when interviewed by the New Straits Times, also explained the reasons why the ringgit continues to hit new lows, one of the key factors is that Malaysia’s policy direction is not clear, such as in the implementation of pro-business and rationalization of subsidies and other reforms to help economic growth is still lagging behind, resulting in the performance of the ringgit is not strong.
Lee Heng Guie also pointed out that the government’s focus last year was on stabilizing the political situation, and this year it is to save the economy, and now everyone is looking forward to the details of the main data center (PADU) and rationalization of subsidies as soon as possible to clarify the details of the policy.
He said that Malaysia’s current account surplus has also shown signs of narrowing, the market is also worried about the emergence of double deficits, but believe that the situation is short-lived. Overall, although the RM is currently undervalued, but by a variety of negative sentiment, so the RM in the short term need to be under pressure.
SGD as a “mini dollar”
Felitto pointed out that when the Federal Reserve began to raise interest rates, Singapore also followed suit, so the interest rate differential between the United States and Singapore is smaller than Malaysia, which makes the Singapore dollar more attractive than the RM.
“As a reserve currency, the SGD plays a bigger role at the regional level compared to other currencies, as if it were a ‘mini-dollar’. Hence, in times of uncertainty, the demand for the SGD will be higher.”
He said when the market is filled with uncertainty, it usually favors the reserve currency, with the strongest reserve currency globally being the US dollar and regionally the SGD.
In addition, Lee Heng Guie pointed out that once the Fed cuts interest rates, it will boost the RM, but the strength of the impact will depend on the magnitude of the Fed’s interest rate cuts.
Need to remove internal and external problems
Lee Heng Guie believes that if the RM is to appreciate significantly, the need to remove the internal and external problems; outside the Xu Xuyi U.S. dollar trends and the global situation, within the need to have investment support.
“Assuming that we are able to attract foreign investment, it will also boost the confidence of local investors. It is believed that our economy this year is expected to be better than last year, as evidenced by January’s export figures.”
He said the only risk within is that consumption is not strong, mainly because the retaliatory consumption effect has receded, high costs and policies such as aid payments remain unclear.”
On the private investment front, Lee Heng Guie believes that the outlook for construction, manufacturing, and services is positive that the semiconductor market is expected to drive growth in manufacturing exports, and the bilateral implementation of the visa-free policy between Malaysia and China will also stimulate the services sector and further support Malaysia’s economy and investment outlook.
“However, it will take some time for the RM to digest these positive factors.”
Ringgit trend continues to slump
Bank Negara’s confidence shouts had little effect as the ringgit opened weaker at 4.805 against the dollar, and although it had rallied in early trading, it ended flat at 4.80, remaining at its lowest level in 26 years.
At 9 a.m., the ringgit was at 4.8050 against the dollar, 0.1 percent weaker than the 4.80 at which markets closed on Tuesday (20), data from the state bank showed. It was once as low as the 4.8090 level during the session, depreciating 0.19 percent. However, it had recovered 0.13% to 4.7940 by noon. At the market close, the RM exchange rate was flat at 4.80.
Meanwhile, the ringgit was trading at 3.5754 against the Singapore dollar, depreciating 0.22% from yesterday’s closing level of 3.5674. By 11.30 pm, the depreciation did not subside and depreciated further by 0.6% to 3.5891, setting a new intraday record since the separation of Malaysia and Singapore and the lowest ever.
When the market closed, the ds converged, depreciation of 0.09% to 3.5707, but under heavy selling pressure, the decline in the afternoon session once again expanded, the final at 3.5712, the whole day depreciation of 0.11%!
After yesterday’s depreciation of the RM to the 4.80 level, the Bank of China then stepped in to explain the current performance of the RM, and confidence shouting most analysts predicted that the RM will be expected to rebound this year.
