Finance Minister: Ringgit Depreciation Caused By Temporary Factors, Currency Expected To Strengthen
Author Avatar
(Image: The Star)

Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz has reassured the public that the ringgit’s current depreciation is caused only by temporary factors. It is expected to be strengthened eventually by Malaysia’s strong economic fundamentals and prudent management of the currency.

According to the minister, one of these temporary factors is the international community’s expectations for the global monetary situation. There has been a continued tightening of global liquidity, which in effect, has caused investors to begin speculating and taking precautions. “As a result, they have reallocated funds to higher-yielding assets denominated in US dollars. This has led to the depreciation of various global currencies, including the ringgit,” he explained.

The ringgit is also affected by expectations that China’s growth prospects will deteriorate this year, due to the republic’s strict implementation of movement restrictions in major cities, stemming from a zero-Covid policy. This is as China is a major consumer of Malaysian goods and services; exports to China accounts for a significant 10.7% of Malaysia’s gross domestic product (GDP), in comparison to other countries, such as Indonesia (2.1%) and Thailand (1.3%).

(Image: Malay Mail)

Additionally, volatile global geopolitical tensions have impacted global economies, which indirectly led to the weakening of several currencies as well. “This is reflected in the value of the VIX, or the investor ‘fear index’, which has increased to 25.7 points (as of 28 May) from the previous average of 18 points. This has also caused investors to flock to safe-haven assets – such as gold and the US dollar – putting downward pressure on various currencies, including the ringgit,” Tengku Zafrul further elaborated.

Despite all the pressures mentioned above, however, Tengku Zafrul is confident that the ringgit’s value will remain stable, and then recover in the near future. This is as Bank Negara Malaysia (BNM) actively manages the local currency to ensure that the local note’s fluctuation does not overwhelm the local economic sector.

“What is more important are our economy’s strong fundamentals, such as the country’s continued economic growth prospects. The ringgit will continue to strengthen after the economy expanded by 3.6% in the fourth quarter of 2021 and 5% in the first quarter of 2022,” said Tengku Zafrul, adding that this recovery is also reflected in the most recent analysis by the International Monetary Fund (IMF).

(Image: Samsul Said/Bloomberg)

For context, the IMF projected a 5.75% GDP growth for Malaysia in 2022, propelled by both domestic demand and strong external demand.

Finally, Tengku Zafrul also said that the demand for ringgit will continue to remain strong, given expectations of a current account surplus.

To note, the Malaysian ringgit hit an all-time low against the Singapore dollar last week, weakening past 3.20 for the first time. On 19 May, the local currency also weakened past 4.4 against the US dollar for the first time since the onset of the pandemic.

(Source: The Edge Markets)

1 1 vote
Article Rating


Comments (0)

Notify of

Inline Feedbacks
View all comments
Top Personal Finance News Articles
Post Image
Petrol Price Malaysia Live Updates (RON95, RON97 & Diesel)
The RinggitPlus Team
- 10th August 2022
We provide weekly updates on every Friday at 5pm on the prices of RON95, RON97 and Diesel in Malaysia and a chart that shows the movement of fuel prices across a 6-week period. Bookmark this page now!
Post Image
Astro 4K Ultra HD Broadcast To Be Available For Subscription By The End of This Year
Brian Chung
- 14th August 2018
By the end of 2018, Astro customers will be able to watch football matches in Ultra HD. Read on to know more about the 4k Ultra HD service.
Post Image
Touch n Go RFID: What Malaysian Road Users Need To Know
Jacie Tan
- 10th August 2018
Everyone’s talking about Touch ’n Go RFID being used at Malaysian highway tolls soon – here’s what you need to know about it.
Post Image
Best High Interest Savings Accounts In Malaysia (May 2022)
Pang Tun Yau
- 31st May 2022
Make your money work for you by depositing them into the best high-interest savings accounts in Malaysia!

Related articles

Related Posts Image
Related Posts Image
Related Posts Image
Related Posts Image