Malaysian ringgit hits new low, RM3.56 to Singapore dollar

MALAYSIA: The ringgit experienced a double blow as it plummeted to unprecedented lows against both the US dollar and the Singapore dollar.

The ringgit’s alarming descent resulted in a closing rate of RM4.7987 against the US dollar, a depth not seen since the Asian financial crisis in 1998.

Simultaneously, it hit a new low against the Singapore dollar, dropping to RM3.57 on Wednesday (21 Feb) before recovering slightly to RM3.5672.

Before December 2023, the Singapore dollar had already reached the S$1 to RM3.5 threshold on a few occasions, notably in July, October, and November.

Over the past months, the Singapore dollar has risen from 3.43 to 3.5 against the Malaysian Ringgit.

On 12 July 2023, the Ringgit against the Singapore dollar dropped to a daily low of 3.4783.

At the beginning of 2023, the exchange rate was only 3.28.

These declines underscored concerns within the financial markets, compounded by the recent lacklustre performance of Malaysia’s capital market and economic growth figures falling short of official projections.

To calm the markets, Bank Negara issued a statement on Tuesday, pointing out that “most analysts are forecasting for the ringgit to appreciate this year.”

Second Finance Minister Datuk Seri Amir Hamzah Azizan, in an interview with Bernama, refrained from speculating on the year-end target for the US dollar-ringgit exchange rate.

However, he emphasized the government’s commitment to bolstering foreign direct investment, which is anticipated to bolster the ringgit’s resilience in the face of market volatility.

Market analysts attribute the ringgit’s depreciation to shifting expectations regarding a Federal Reserve rate cut in March, with Tradeview Capital Sdn Bhd vice president Tan Cheng Wen highlighting a dwindling probability of such an event.

“However, the probability of this event has significantly decreased, now standing at a mere 10 per cent.”

This change in sentiment has resulted in a strengthening of the US dollar and Singapore dollar relative to the ringgit

“Investors are closely monitoring the situation for further developments in the coming weeks,” he told the Business Times.

Despite the ringgit’s weakened position against the Singapore dollar, SPI Asset Management managing director Stephen Innes believes that the situation may present opportunities, particularly in the tourism sector, as a weaker ringgit could attract more tourist spending.

However, Innes expressed scepticism about the MYR/SGD cross exceeding 3.60, citing the Singapore dollar’s resilience during periods of dollar strength.

Recent data indicating an 8.7% year-on-year increase in Malaysia’s exports in January provided a silver lining amidst the currency turmoil.

Nonetheless, Bank Negara Governor Datuk Abdul Rasheed Ghaffour stressed that the ringgit’s performance, along with other regional currencies, is influenced by external factors such as shifting US interest rate expectations and geopolitical tensions.

“Bank Negara is of the view that the current level of the ringgit does not reflect the positive prospects of the Malaysian economy going forward,” he said.