Explaining the Currency Dilemma of Ringgit... (March 2015)

While writing this post, major dailies are reporting that our currency Ringgit (MYR) is weakening against USD drastically. Yes, it does pose some financial risk to our country. We can't deny that we are on the losing side now and we as a Malaysian should know what's happening now.

Why Ringgit so weak?

First, when talking currency, it's always must refer to which currency we are referring to. Here, we take USD, being the world's most traded currency, be our guide. In summary, we can break it down to the following reasons to explain the depreciation of Ringgit:

1. The recovering of US economy
   Undeniably, after the 2008 global financial crisis, US economy is slowly recovering and the momentum has started to pick up since last year. Continue good numbers has already prompt US Federal Reserve to consider begin raising interest rate. Theoretically, a country's currency will appreciate during rising interest rate environment. This explains why stronger USD.
   
   
2. Falling prices of two important oils
   
   Crude Oil and Palm Oil is two of the world's most important oil and Malaysia was blessed with both of them. However, the prices of both oils sliding drastically since mid-2014, affecting our country's export and revenue. Fundamentally, our GDP growth for 2015 definitely will be adjusted downward. Once a country's outlook is bleak, eventually it will reflect in our currency Ringgit also. This explains why weakening MYR.
   
   
   
   
3. Our own problems
   
   Both of the above factors are uncontrollable due to global conditions. However, some local problems which can be avoid, eventually turns on the heat also currently. Problems such as rising household debt, still low household income, waning business confidence due to GST implementation, overvalue property prices and some political issues. These issues will paint a bleak outlook for our country also. Foreign investors may move their investment to our neighboring countries instead, resulting in the depreciation of our currency also.

Hopefully, we can ride through the currency storm this round and break into a brighter future with stronger currency. Oh ya... we just can't forget to highlight the possible impact if government is going to bail-out the 'hot in the water' 1MDB. Good luck.