Singdollar at lowest this year against ringgit
Reuters file photo
SINGAPORE — The Singapore dollar traded on Wednesday (May 3) at S$1 to 3.0933 Malaysian ringgit — the lowest the exchange rate has been since the start of the year, Bloomberg data showed.
The low this year against the ringgit, below the previous low of RM3.0957 set on Jan 2, was reached at 4.05 pm. The ringgit has been on a rebound since mid-April, backed by the recovery in commodity prices and an overall strengthening of the Malaysian economy backed by stronger export numbers, said analysts. On April 13, S$1 was trading at RM3.1786 — an all-time high.
A slew of measures, introduced in April this year by Malaysian policy makers to revive the country’s financial markets, is buoying the currency after it stood out as the worst-performing Asian currency in 2016.
“Global trade recovery and improvement in commodities demand are supporting Malaysia’s export economy, increasing export proceeds and equity inflows. Malaysia’s ringgit stands out as cheap on valuations,”
Mr Sim Moh Siong, senior currency strategist at Bank of Singapore, said.
Malaysia’s currency gains had been limited by bond outflows, said Mr Sim, after Bank Negara Malaysia imposed measures to curb speculative activity in the offshore non-deliverable forward (NDF) market in November.
On April 13, the central bank said it would deepen financial markets, including revising rules to allow investors to fully hedge their currency exposure and permit all domestic players to short-sell government bonds.
“There is room for the ringgit to play catch-up to the appreciation of its Asian currency peers, which could result in the SGD-MYR rate drifting down to 3.05-3.07,” Mr Sim added.
Recovering from a near-20-year low, the Malaysian ringgit has been strengthening against almost all of its major peers across Asia, besides the Singapore dollar. According to Bloomberg, investors are picking
Malaysian stocks on expectations higher crude prices will bolster state revenues and that government spending will increase ahead of a possible general election this year.
“Ever since the stock market broke above its two-year range in mid-March, funds and rating agencies have become more confident in the Malaysian economy and its financial markets,” noted a DBS Group report released on Wednesday. The FTSE Bursa KLCI index soared to a near-24-month high, fuelled by higher commodity prices and an optimistic outlook.
The ringgit is very sensitive to crude oil prices, and they exhibit strong positive correlation over the past five years, said market analyst at CMC Markets Singapore Ms Margaret Yang. Crude oil prices nearly doubled from the same period last year, and this cyclical tailwind has helped to buoy Malaysia’s currency, she added.
According to Mr Philip Wee, senior currency economist at DBS Group, the most important development would probably be the US$1.2 billion settlement between 1Malaysia Berhad (1MDB) and Abu Dhabi
International Petroleum Co announced on April 24.
“With the resolution providing some closure to the 1MDB scandal, (Malaysian) PM Najib Razak is now seen bringing forward the election (due in mid-2018) into this year … The stock market has been known to rally ahead of elections.”
