Ringgit set for best year since 1973
Malaysia’s ringgit rose, headed for the best annual gain since 1973, as the central bank’s three interest-rate increases this year boosted the yield advantage on the nation’s assets.
The ringgit advanced 11 per cent in 2010, a performance that was second only to Japan’s yen, as Southeast Asia’s third- largest economy emerged from recession. The currency reached a 13-year high in November after Bank Negara Malaysia relaxed foreign-exchange controls in August that were imposed at the height of the Asian financial crisis in 1998.
“Malaysia was among the first to hike rates after the crisis, which shows confidence in the economy,” said Enrico Tanuwidjaja, a Singapore-based economist at OSK-DMG Group. “Then there was the liberalization of foreign-exchange measures, which was another step toward full ringgit liberalization.”
Malaysian companies can now settle cross-border trades in ringgit and exporters can hedge currency risks beyond a previous 12-month threshold, Bank Negara said on Aug. 18. Former premier Tun Mahathir Mohamad fixed the ringgit at 3.8 to the dollar in September 1998, blaming speculators for a 35 per cent plunge in the currency. A ban on offshore trading of the ringgit has remained in force since.
2011 Outlook
The central bank raised the overnight policy rate this year to 2.75 per cent from a record-low 2 per cent, boosting the preimium over near zero rates in the US. Gross domestic product rose 5.3 per cent in the third quarter, after increasing 8.9 per cent in the previous three months, the government reported in November. The economy will expand 6.7 per cent this year and 5.3 per cent in 2011, the International Monetary Fund forecast Oct. 6.
Central bank Governor Tan Sri Dr Zeti Akhtar Aziz said this month that borrowing costs are currently at “appropriate levels” given the outlook for inflation and growth.
The ringgit may slip next year “as growth is expected to slow down and the central bank may not raise rates as aggressively as this year,” Tanuwidjaja said, citing a range of 3.12 to 3.20 per dollar for 2011. -- Bloomberg
The ringgit advanced 11 per cent in 2010, a performance that was second only to Japan’s yen, as Southeast Asia’s third- largest economy emerged from recession. The currency reached a 13-year high in November after Bank Negara Malaysia relaxed foreign-exchange controls in August that were imposed at the height of the Asian financial crisis in 1998.
“Malaysia was among the first to hike rates after the crisis, which shows confidence in the economy,” said Enrico Tanuwidjaja, a Singapore-based economist at OSK-DMG Group. “Then there was the liberalization of foreign-exchange measures, which was another step toward full ringgit liberalization.” The ringgit appreciated 0.1 per cent to 3.0850 per dollar as of 10:44 a.m. in Kuala Lumpur, taking gains for the month to 2.8 per cent, according to data compiled by Bloomberg. The currency reached 3.0775 on Nov. 4, the strongest level since 1997. Local financial markets are closed tomorrow.
Malaysian companies can now settle cross-border trades in ringgit and exporters can hedge currency risks beyond a previous 12-month threshold, Bank Negara said on Aug. 18. Former premier Tun Mahathir Mohamad fixed the ringgit at 3.8 to the dollar in September 1998, blaming speculators for a 35 per cent plunge in the currency. A ban on offshore trading of the ringgit has remained in force since.
2011 Outlook
The central bank raised the overnight policy rate this year to 2.75 per cent from a record-low 2 per cent, boosting the preimium over near zero rates in the US. Gross domestic product rose 5.3 per cent in the third quarter, after increasing 8.9 per cent in the previous three months, the government reported in November. The economy will expand 6.7 per cent this year and 5.3 per cent in 2011, the International Monetary Fund forecast Oct. 6.
Central bank Governor Tan Sri Dr Zeti Akhtar Aziz said this month that borrowing costs are currently at “appropriate levels” given the outlook for inflation and growth.
The ringgit may slip next year “as growth is expected to slow down and the central bank may not raise rates as aggressively as this year,” Tanuwidjaja said, citing a range of 3.12 to 3.20 per dollar for 2011. -- Bloomberg
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