Malaysia: Malaysian ringgit continues to lose ground
August 22, 2013
The Malaysian ringgit (MYR) traded at 3.29 per USD on 21 August, which was 3.1% weaker than the level registered on the same day of the previous month. The figure follows on the 2.8% decline recorded in the month of July. Moreover, the value of the MYR against the U.S. dollar has fallen to its lowest level since June 2010. On a year-to-date basis, the ringgit has lost 7.6% against the USD.
Increasing net outflows from Malaysia have caused the ringgit to lose ground against the U.S. dollar. Malaysia's declining export sector is eroding the country's current account, which has had a surplus since the 1997 Asian crisis. The current account fell to USD 850 million in the second quarter, down from 2.8 billion in Q1 and 7.5 billion in Q4 2012. In addition, growing concerns about a reduction in the monetary stimulus program in the U.S. have led to a selloff of emerging market currencies, including the ringgit.
Malaysia's central bank left its key policy rate unchanged at 3.0% at its most recent meeting in July. The Bank has maintained the policy rate at the same level since May 2011, while it has recognized that worsening growth prospects and further currency devaluation could prompt a revision.
FocusEconomics Consensus Forecast panellists expect the ringgit to trade at 3.1 per USD by the end of this year. For 2014, the panel projects the ringgit to trade at 3.07 per USD.
Author: Carl Kelly, Economist