Ringgit at 13-year high against US dollar

KUALA LUMPUR: The ringgit rose to a fresh 13-year high versus the US
dollar yesterday, breaking the 3-mark for the first time since the end
of the 1997-1998 Asian financial crisis.

From 3.005 against the USD last Friday, the local currency appreciated to 2.995 at noon yesterday, and ended at 2.991.

This is the first time the ringgit has advanced beyond the 3-level against the greenback since October 1997.

The ringgit’s current level is some 21% higher than the 3.80 ringgit-USD peg that existed from September 2008 to July 2005.

Prior to the Asian financial crisis, the ringgit had mostly traded at around the 2.50 to the USD.

Economists,
however, were slightly weary of the situation, noting that the
ringgit’s strength was mainly caused by the USD’s wide-scale
depreciation as well as fund flows into the region.

While a
strong ringgit will benefit importers and consumers, it will affect
Malaysia’s export competitiveness relative to economies whose currencies
are more aligned to the USD, such as China and countries in Indochina,
an analyst noted.

“We expect the ringgit to hit 2.95 against
the greenback this year. The recent movement in favour of the ringgit is
therefore not altogether surprising. However, the important thing to
note is that it is the weakness of the USD rather than the strength of
the ringgit which is driving the exchange rate,” MIDF head of research
Zulkifli Hamzah told The Edge Financial Daily.

“This is reflected by the other cross-rates, which show the ringgit losing ground next to other currencies”, said Zulkifli.

The
USD weakened against all major currencies, with the dollar index, which
is tracked against a basket of major currencies, slipping 3.8% to
74.113 from 77.049 recorded just on March 1.

In the past 12 months, the greenback has depreciated 6% against major currencies.

Over the last decade, it has lost 40% of its value.

CIMB head of economic research Lee Heng Guie also pointed out that external factors had helped push the ringgit.

“It
is the dollar’s broad-based weakness story, due partly to the recent
S&P’s downgrading on the US sovereign outlook,” Lee told The Edge
Financial Daily. He added that the fundamentals remain supportive of the
ringgit.
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Better
economic growth, improving prospects for corporate earnings and the
building surplus in the current account are said to provide a solid
backbone for the ringgit.

Bank Negara in its annual report released earlier this month projects for the current account surplus to hit RM100.7 billion.

Conversely, the country’s fiscal deficit is expected to fall 20 bps to 5.4% of GDP this year.

“Another
swing factor for the ringgit is the inflow of private capital into
emerging markets, including Malaysia, which also drives the ringgit
higher. This forces Bank Negara to intervene intermittently to moderate
the pace of the ringgit’s appreciation,” said Lee.

He emphasised
that Bank Negara’s foreign exchange holdings surged by US$8.4 billion
(RM25.14 billion) in the first two weeks of April, a reflection of the
central bank’s proactive foreign exchange intervention.

JP Apex
Securities analyst Ng Keat Yung also opined that the ringgit’s
impressive performance could be attributed to its own strength.

“It is the ringgit’s strengthening, helped by the positive fundamentals of the Malaysian economy,” said Ng earlier.

Speaking
to Bernama, a currency trader said the government’s Economic
Transformation Programme (ETP) had fuelled optimism amongst investors.
He perceived that the ringgit was still undervalued, and could
appreciate further to between 2.80 and 2.85 versus the USD by year-end.

“The
trend for a stronger ringgit has been there for the past two weeks and
it will invite more local and foreign investors into the local market,”
said the trader.

Another major driver for the ringgit’s climb is
the expectation for Bank Negara to raise interest rates to combat
growing inflation.

Last Wednesday, it was announced that the
country’s inflation rate climbed to 3% in March, from 2.9% in February
and 2.4% in January.

The 3% leap in March is the biggest since April 2009, when the inflation rate stood at 3.1%.

Economists
anticipated the increase, as a Bloomberg survey had predicted the CPI
would increase 3.1% on the back of rising commodity prices.

Bank Negara has kept the overnight policy rate (OPR) at 2.75% since July, following three increases in early 2010.

The central bank expects inflation to average 2.5% to 3.5% this year.

The Monetary Policy Committee is due to meet next on May 5.

In
contrast to the subdued inflationary pressures and record low interest
rates in the US, inflation has been a prime concern in the region.

Countries
including China, India, South Korea, Indonesia, Thailand, the
Philippines and Taiwan have all implemented interest rate hikes in an
effort to manage inflation.

Several Asian currencies rallied
along with the ringgit, in anticipation that central banks in the region
will raise interest rates further.

High interest rate
differentials between emerging countries and the developed world,
expectations of more rate hikes and better growth prospects are also
fuelling the entry of speculative funds into the region.

Additionally,
rising commodity prices pushed the Australian dollar to a 29-year high
as it traded at 1.077 against the US dollar yesterday.

In a
report issued last week, Barclays Capital said it expects the ringgit to
undergo further appreciation, as it is flanked by the country’s large
balance of payments surplus and rising commodity prices.

A higher flow of funds into the equities market is also expected to boost the ringgit.

The
strong ringgit is not only good news for Malaysians taking their
holidays in the US, China or Hong Kong, but also a number of sectors.

According
to analysts, beneficiaries of a firmer ringgit are import-based
industries or those with large US dollar-denominated costs or
borrowings. They include the automotive, consumer and airline
industries.

Conversely, the losers are primarily export-oriented
industries which will earn less in ringgit terms for foreign
currency-denominated sales.

These include latex glove makers, semiconductor and hard disk drive sectors.

Oil
and gas entities have contracts denominated in US dollars, although the
impact is mitigated by the fact that oil prices are hitting three-year
highs, which encourages further exploration activities.

The
impact on the plantations is probably neutral, as palm oil prices are
expected to be weighed down by higher output and stocks in the second
half of the year.

Crude palm oil prices are denominated in
ringgit, and a stronger ringgit will make it less competitive versus
other edible oils, such as soyoil, which are denominated in USD.

However, a weaker US dollar will also boost commodity prices in general.

Stronger ringgit not a problem


So long as rise in tandem with other regional currencies PETALING
JAYA: An appreciating ringgit will not have as much of an impact on the
exports front as long as it strengthens in tandem with other currencies
in the region. Malaysia's top five export destinations in
February were Singapore, China, Japan, the European Union and the United
States. These countries were also the top five destinations for exports
last year. Economists told StarBiz that a strengthening
ringgit would not be a problem as long as the currency's movement was
synchronised with the region where competitors include Thailand,
Indonesia and the Philippines. Malaysia's competitors in the
electrical and electronics (E&E) industry, which made up nearly 40%
of total exports last year, include South Korea and Taiwan. [You must be registered and logged in to see this image.]
To
varying degrees, emerging Asia's currencies have appreciated against
their major trade partners as growth risks faded and the loose monetary
policies of the United States and the 17-member eurozone prompt
investors to shift their focus to more robust markets. Bank Islam Malaysia Bhd
chief economist Azrul Azwar said the ringgit's rise should not post
much problem for local exporters as long as the currency's rise was not
out of sync with regional currencies. In any case, economists have pointed out time and again that Bank Negara would continue to intervene in the currency markets to ensure that the ringgit's movement remained orderly and gradual. “This
has always been the case, Bank Negara will intervene so as to ensure
that the ringgit's movement will not impact the manufacturing sector's
exports-intensive industries,” Azrul said. He added that part of
the reason for the rise of currencies in emerging Asia was due to
expectations of tighter monetary policy as inflation fuelled by higher
crude oil and commodity prices hit these economies, where demand has
been stronger compared to the developed economies. Affin Investment Bank Bhd
economist Alan Tan said there were indications that the Federal Open
Market Committee (FOMC) would continue to keep US benchmark interest
rates low and monetary policy loose. [You must be registered and logged in to see this image.] Filepic:
A money changer counts U.S. dollar bank notes and Malasyian ringgit
notes for customers in Kuala Lumpur. Economists told StarBiz that
a strengthening ringgit would not be a problem as long as the
currency’s movement was synchronised with the region where competitors
include Thailand, Indonesia and the Philippines.
“The
FOMC members are signalling that the easy monetary policy will continue
as jobs and housing remain weak while the first-quarter gross domestic
product growth is likely to be softer than the previous quarter,” he
said. The FOMC would release its rate decision on Wednesday while the first-quarter figures would be released on Thursday. Meanwhile, SMI Association of Malaysia national president Chua Tiam Wee, whose members expect the ringgit to strengthen further, said any rise in the ringgit would have some impact on exporters. “As trade is mostly conducted in US dollars, exporters will still have to fulfill their orders and absorb the losses,” he said. Chua
added that exporters would just have to be more productive and find
ways to mitigate the strengthening ringgit via hedging or source their
raw material in a more cost-effective way.

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i got some usd at home still havent change back

phoenix87 wrote:[You must be registered and logged in to see this image.]
i got some usd at home still havent change back

oh-uh... [You must be registered and logged in to see this image.]