SINGAPORE: From mid-June to the end of September of this year, the value of the Malaysian ringgit relative to the US dollar increased by about 11%. Leaders of the nation’s ruling coalition were eager to blame “sound government policies” for the ringgit’s recent turnabout.
These policies include, among other things, structural reforms, government programs to boost foreign direct investment, and incentives for companies with government ties to repatriate their international profits.
Generally speaking, the media has likewise ascribed the ringgit’s rise to short-term causes, including the anticipation of US interest rate reduction. Estimates of the country’s falling recession odds in mid-2024 gave rise to anticipation of interest rate reduction.
Strong export growth is another frequently mentioned factor contributing to the ringgit’s appreciation. The palm oil sector and important manufacturing sectors, including machinery and equipment, electrical, and electronics, were the main drivers of this year’s 12% year-over-year increase in exports in July and August. Prior to the current ringgit appreciation cycle, Malaysian policymakers had maintained that the currency was undervalued. This argument essentially states that a change in the Malaysian economy’s fundamentals has strengthened the currency’s value.
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