The Ringgit Malaysia (RM) is one of Asia’s best performing currency,, appreciating by 7.0% year-to-date against the USD (As at 26 April 2010). In this article, we will take a look on the strong performance and its implications for investors.
INTRODUCTION
Ringgit was the best performing Asian currency. On a year-to-date basis, ringgit gained 7.0% against USD as compared to other Asian currencies. There were several reasons that we believe were likely behind ringgit’s strength. These includes a better than expected GDP growth in the fourth quarter and most importantly, Bank Negara’s unexpected move in being the first central bank in Asia to raise interest rate.
KEY POINTS
- Ringgit was the best performing Asian currency with a 7.0% gain y-t-d
- Better-than-expected 4Q 09 GDP growth & rate hike contributed to strong performance
- We expect ringgit to further appreciate on speculation of Yuan appreciation
- Big Mac Index indicates ringgit is undervalued
- Lesser bond issuance & higher demand for ringgit-denominated bond also help to support
- Malaysian investors should hold ringgit-denominated bonds and avoid global bonds
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Ringgit expected to stay on uptrend
The ringgit is expected to stay steady next week, supported by year-end window dressing activities, dealers said.
They said more companies were now exchanging foreign currencies for the local unit to balance their year-end accounts.
"Positive economic news in the country and the region will also attract more capital inflows that will support the local currency to trade higher," a dealer said.
He also said that a weaker dollar performance has also encouraged players to unload their dollar position.
The ringgit is expected to trade above the 3.00 level against the US dollar next week.
During the week, the ringgit was firmer backed by gains in other regional currencies as well as window-dressing activities.
On Friday-to-Friday basis, the local unit was higher at 3.0930/0980 from 3.1340/1370 last week.
Against the Singapore dollar, it was firmer at 2.3783/3827 compared with 2.3862/3905 last Friday. It was also steadier against the yen at 3.7306/7384 from 3.7314/7354 previously.
The ringgit appreciated against the British pound to 4.7781/7870 compared with 4.8947/9000 last week and strengthened against the euro to 4.0636/0708 from 4.1670/1716 previously. --Bernama
Read more: Ringgit expected to stay on uptrend http://www.btimes.com.my/Current_News/BTIMES/articles/20101225094029/Article/index_html#ixzz19D2ircoa
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