Good News For Consumers As Currency Hits 13-year High

Monday April 25, 2011
By ISABELLE LAI
isabellelai@thestar.com.my


PETALING JAYA: Malaysians can look forward to paying less for imported goods with the ringgit strengthening to its highest level in 13 years.

Economists expect the ringgit to steadily appreciate against the US dollar with several predicting the local currency would strengthen to between 2.95 and 2.90 against the greenback in the coming months.

RAM Holdings Bhd chief economist Dr Yeah Kim Leng said the ringgit was projected to hit 2.93 against US$1.

As of the last trading day, the exchange rate stood at RM3.01 to US$1. It reached a 13-year high of 3.0290 on Feb 4.

This is the strongest level the ringgit has been at since the 1997/98 Asian financial crisis, when it was pegged to the US dollar. Dr Yeah said the strengthening of the ringgit went hand-in-hand with the weakening US dollar.

A stronger ringgit, he said, meant imported goods would be cheaper while boosting overseas purchasing power and savings on overseas education and travelling.

However, he said the strength of the ringgit should also be measured against other currencies such as the euro, British pound and Australian dollar.

While the ringgit had strengthened against the euro and pound, it remains weaker to the Australian dollar.

“European countries have suffered from the global financial crisis and their recovery is still weak.

“Australia's economy has experienced strong growth from its strong rise in commodity exports.

“Therefore, the strengthening ringgit is not as alarming when compared to the basket of currencies,” he said.

Although a strong ringgit will benefit many Malaysians, he cautioned that exporters and manufacturers would face strong pressure to adjust.

“They will need to improve productivity and efficiency in order to maintain their competitiveness.

“If they are able to adjust and upgrade themselves, then it will be very healthy for the country,” he said.

MIDF Research economics head Anthony Dass said the coming months would see more flow of funds into Malaysia as well as a strengthening ringgit.

“It will help contain the inflation of imported prices. Food prices won't go up so much, so that gives us some comfort,” he said.

The ringgit was valued at RM2.50 per US$1 prior to the Asian financial crisis.

http://thestar.com.my/news/story.asp?file=/2011/4/25/nation/8547049&sec=nation