Against the hope of detractors and dissenters against Prime Minister Dato’ Sri Mohd. Najib Tun Razak, Ringgit Malaysia has been strengthening against the Greenbacks.
The Malay Mail Online:
Ringgit opens higher against US Dollar
BY BERNAMA – 23 MARCH 2016 @ 9:41 AM
KUALA LUMPUR: The ringgit strengthened to open higher against the US dollar today on renewed interest in the local currency, dealers said.
At 9.01 am, the ringgit was quoted at 3.9850/9910 versus the US dollar from 4.0050/0100 on Tuesday. A dealer said the ringgit saw fresh demand following the inflow of foreign funds into the local bourse.
Meanwhile,the greenback also edged down in reaction to Brussel’s airport bombing, he said. The local currency was also traded higher against other major currencies.
It appreciated against the Singapore dollar to 2.9308/9356 from Tuesday’s 2.9388/9444 and strengthened against the yen to 3.5501/5564 from 3.5865/5922 yesterday.
The local unit gained against the British pound to 5.6679/6780 from 5.7091/7171 and advanced against the euro to 4.4680/4763 from 4.4852/4916 on Tuesday. –BERNAMA
Prime Minister Najib did explain several times that the RM against USD is a phenomena not based on economic fundamentals but most likely is caused by perception and sentiments, coupled with aggressive attacks against the Malaysian currency.
A brief recap on the sliding of the RM against USD.
International Banker article:
Accounting for the Malaysian Ringgit’s Slump in 2015
By John Manning – email@example.com
In August, the Malaysian ringgit dropped to an all-time low against the dollar of neighbouring Singapore, while a further slide in subsequent weeks led to the currency in late September hitting an 18-year low against the US dollar.
US Dollar / Malaysian Ringgit (Source: OTC Interbank | Trading Economics)
The ringgit has been among the world’s weakest performers over the last 12 months or so, having consistently shed its value since September 2014. In the first nine months of 2015 alone, the ringgit dropped by 28 percent against the US dollar, and when it closed at 4.47 on September 29, it marked its weakest performance against the greenback since Asia’s economic crisis of 1997, when at one point the dollar fetched RM4.88.
As a heavy exporter of oil, the ringgit has been damaged by the collapse in the global price of the commodity. Oil’s slide has put a heavy degree of pressure on the finances of the Malaysian government, which normally earns around 22 percent of its total revenue from oil-related activities. While the price of oil has not dropped as dramatically is it did during the second half of 2014, a steady decline has still occurred throughout this year; indeed, by early September, Brent crude had halved in price over the course of the previous 12 months.
Another pivotal issue that has sent the ringgit crashing has been the release of data showing that Malaysia’s reserves of forex had fallen substantially during the year. Forex reserves had plunged by 28.3 percent during the 12 months to the end of August 2015—the biggest yearly drop since 2009, and with total reserves also dipping below $100 billion, the total remaining amount was the lowest since 2010. Such significant falls all but confirm that Malaysia’s central bank has been intervening in the forex markets in order to stop the ringgit’s slide, but evidently to no avail. The mere fact that Malaysia now has lower reserves suggests that its ability to shore up the currency, should it continue to fall to critical levels, continues to diminish.
While such economic factors have played a massive role in causing the ringgit to plummet, especially earlier in the year, analysts have also attributed its weakness to political factors, especially from the third quarter onwards, with many labelling Malaysia’s ongoing government scandal as the worst in the country’s political history. For several months now the 1Malaysia Development Berhad (1MDB) fund has been facing the scrutiny of official investigations conducted by no less than six countries. The wholly government-owned organisation was established in 2008 to promote development in Malaysia, with the ultimate aim of transforming the country into an economic and commercial powerhouse in the region. In recent years, however, the fund has come under intense pressure, initially because it missed an important $11-billion payment to its creditors, and then after further investigations found that hundreds of millions of dollars had been siphoned off from the fund under conspicuous circumstances.
Most significantly of all, however, was the uncovering of a paper trail in July that revealed that $700 million allegedly flowed from the fund straight into the account of Malaysia’s Prime Minister Najib Razak, who in 2009 had made himself chairman of 1MDB’s advisory board. The ensuing weeks saw a number of political moves within Malaysia’s government, with a wholesale cabinet reshuffle being chief among them, as Najib removed several ministers who had been critical about his role at 1MDB. On August 17, the ringgit plunged to a 17-year low against the US dollar, as investors showed heightened concern over the turmoil surrounding Najib, which was also exacerbated by subdued crude prices during the period.
Switzerland has opened its own criminal investigation related to 1MDB on the basis of suspicion of corruption among public officials. After the US Federal Bureau of Investigation began a probe in the final week of September into possible money laundering, and fresh allegations over irregularities in real estate deals involving Najib’s stepson surfaced, the ringgit posted its heaviest weekly loss since 1998, when Asia’s financial crisis prompted the Malaysian central bank to impose capital controls on the currency.
The scandal itself has dragged the ringgit down heavily, while also triggering a wave of political unrest in Malaysia along socio-economic and ethnic lines, given that the government has received widespread support from Ethnic Malays, while ethnic-Chinese communities have largely called for Najib’s resignation. Such political tensions will play their parts in keeping potential investment away from the country while the 1MDB investigations remain ongoing; both Singapore and Switzerland, for example, have suspended bank accounts tied to 1MDB. While the extent of the scandal’s effect on the ringgit is difficult to exactly quantify at present, the likelihood of credit-rating downgrades from Fitch, Moody’s, et al., is increasing every day, and if administered will in turn provide some clarity as to how much lower the ringgit can be expected to go.
October thus far has seen a small reversal of the ringgit’s slide, with the currency having recovered by 7 percent, mainly on the back of a surge in crude prices. In terms of the long-term outlook for the battered currency, however, the prospect of an increase in interest rates by the US Federal Reserve in the near future is keeping many emerging markets—including Malaysia’s—on their toes, as further capital is expected to flow out of such economies and back into the US. The expected rate hike, coupled with China’s ongoing economic slowdown, means that the overall demand for ringgits in the coming months is not expected to recover significantly, while the moderately unstable political situation is also likely to keep investors at bay for some time, and low oil prices continue to constrain government revenue. Ultimately, any meaningful recovery in the ringgit does not appear to be on the horizon any time soon.
Last year as the rate of exchange of the RM was escalating fast against the Greenback, Fourth Prime Minister was quick to quirk that the moment Prime Minister Dato’ Sri Mohd. Najib Tun Razak leaves office (either summarily resign, being forced out or toppled), ‘The Ringgit Malaysia would strengthen”.
The Malay Mail Online story:
Want the ringgit to recover? Get rid of Najib, Dr M tells Malaysians
BY JOSEPH SIPALAN
Saturday October 3, 2015
07:23 PM GMT+8
October 03, 2015
08:11 PM GMT+8
Former Prime Minister Tun Dr Mahathir Mohamad delivers his speech at Pusat Bandar Taman Cempaka during high tea with Umno members in Ampang, October 3, 2015. — Picture by Yusof Mat Isa
KUALA LUMPUR, Oct 3 — Tun Dr Mahathir Mohamad asserted today that the Malaysian ringgit will become stronger the moment Datuk Seri Najib Razak steps down as prime minister.
The guest-of-honour at a high-tea talk organised by the Ampang Umno division, the retired prime minister of 22 years said the country and economy have already suffered the ill effects of the various scandals allegedly linked to the prime minister, and can only benefit from removing the source of the problems.
“I am fully confident that if you remove Najib as prime minister, the value of the ringgit will increase,” he said.
Dr Mahathir said the economy has become progressively worse with the ringgit currently at 4.41 to the US dollar and has been persistently sluggish in the local stock exchange.
He stressed that the government in the past would have been worried by even a slight dip in the value of the ringgit, in stark contrast to Putrajaya’s current preference for allegedly sugar-coating the situation.
“In the past we’d go bald if the value fell. Now they say ‘it’s okay, our economy is okay’,” said the 90-year-old who had also held the Finance Ministry portfolio.
“People will think stocks will fall if the value of the ringgit falls, so they will quickly sell. But don’t worry, our economy is very good. Just ask Najib, he’s a specialist in economy. I’m just a medical doctor, I’m no expert in economy,” he added.
Dr Mahathir later said at a news conference that he was not alone in his assessment, claiming that even Bank Negara Malaysia Governor Tan Sri Zeti Akhtar Aziz has said that the ongoing controversy over 1 Malaysia Development Berhad (1MDB) and several others are weighing down the ringgit and economy.
Najib was implicated in corruption investigations into 1MDB after US-based Wall Street Journal reported in July that some US$700 million was funnelled through several government entities into the prime minister’s personal bank accounts two months before the tumultuous May 5, 2013 general elections.
The Malaysian Anti-Corruption Commission has since announced that the money deposited into Najib’s accounts was a donation from a Middle Eastern source.
The prime minister has also denied using any public money, including from 1MDB for personal benefit, though questions have mounted over the source and purpose of the funds.
Dr Mahathir has been among the most vocal critics against 1MBD in the BN and have demanded Najib take responsibility for his brainchild, which is under corruption investigation by government agencies in several countries, including Hong Kong, Switzerland and the UK.
The Kedah-born had also joined in the two-day Bersih 4 rally in Kuala Lumpur, and urged Malaysians to use their “people power” to push for Najib’s removal through a no-confidence vote in Parliament.
That sort of statement is usually made by up-manship banters amongst warring kopi loafers. But not a former Prime Minister and Finance Minister with a illustrious career.
Tun Dr. Mahathir Mohamad was simply sowing the seeds of hatred against Prime Minister Najib in the strategy to demonise him and would hope warung topi talks like this would catch on and escalated from mouth to mouth to get more people loathe the Prime Minister.
In the mind of many, the mechanics of economics are so foreign to them. The low and simplistic understanding on how their lifestyle change as cost of living gone up against the majority of Malays still on fixed income, is a convenient blame against the Government.