Skip to main content
Best News Website or Mobile Service
WAN-IFRA Digital Media Awards Worldwide 2022
Best News Website or Mobile Service
Digital Media Awards Worldwide 2022
Hamburger Menu




CNA Explains: Why did the Singapore dollar hit an all-time high against the Malaysian ringgit?

The Malaysian ringgit slumped to a record low of 3.41 against the Singapore dollar on May 24. 

CNA Explains: Why did the Singapore dollar hit an all-time high against the Malaysian ringgit?

Malaysia Ringgit against the Singapore dollar (Photo: Jeremy Long)

KUALA LUMPUR: Last Wednesday (May 24), the Singapore dollar broke its record against the Malaysian ringgit as it touched 3.4102 according to Bloomberg data.

The value is up 6.16 per cent from about 3.20 a year ago, and up 4.15 per cent since the start of 2023. 

In a statement released on Friday, Malaysia’s central bank Bank Negara Malaysia (BNM) said the recent weakness in the ringgit can be attributed to external developments such as the US debt ceiling impasse and “episodes of stress” in the US and European banking sectors. 

The ringgit, which has lost 4.3 per cent so far this year against the US dollar, on Friday hit its lowest level against the greenback since last November before reversing course to end 0.6 per cent higher.  

CNA spoke to analysts on the factors behind the ringgit’s depreciation against the Singapore dollar and what might lie ahead for the value of both currencies. 


Maybank chief forex strategist Saktiandi Supaat told CNA that a key factor why the Singapore dollar “has been more resilient” than the Malaysian ringgit in the recent bout of strengthening of the US dollar is because both countries have different approaches in interest rate policies. 

The US dollar's recent momentum has been driven by raised expectations that the Federal Reserve will have to keep interest rates higher for longer to subdue inflation.

“As there is no explicit interest rate policy in Singapore, interest rates are market dependent and highly correlated to US interest rates. Consequently, there is less pressure in terms of yield differentials on the Singapore dollar,” said Mr Saktiandi. 

A yield differential is the spread between yields on differing debt instruments of varying maturities, credit ratings, issuers, or risk levels. Generally, when the yield differential widens in favour of a certain currency, that currency will appreciate against other currencies.

Mr Saktiandi explained that Malaysia has an “explicit interest rate policy” set by BNM and as such there is more pressure on the ringgit from the “perspective of a widening yield differential”.

Meanwhile, he explained that the Monetary Authority of Singapore (MAS) monetary policy framework is exchange rate based and is currently set to be on an appreciating path against an undisclosed basket of currencies.

“We think that this framework naturally provides the Singapore dollar with some shelter from bouts of US dollar strength which is what is happening now,” said Mr Saktiandi. 

Mr Afiq Asyraf Syazwan Abdul Rahim, an economist at Kenanga Investment Bank, echoed similar sentiments. 

He said that stronger fundamentals in the Singapore economy has led to the ringgit weakening against the Singapore dollar. 

“The (stronger Singapore dollar against the ringgit) can be attributed to investors' confidence in the Singaporean economy, which is supported by its AAA credit rating, substantial foreign-exchange reserves and solid current account surplus,” added Mr Afiq Asyraf. 

The latest report released by credit rating agency Fitch states that Singapore is rated AAA while Malaysia is rated BBB+. 


Analysts stressed that the ringgit’s slump against the Singapore dollar can be attributed to external factors as well as domestic factors related to the Malaysian economy. 

Kenanga’s Afiq Asyraf recounted how the ringgit soared against the greenback in November 2022 after Mr Anwar Ibrahim was appointed Malaysia’s 10th prime minister. 

The currency had surged by 1.8 per cent on the day of Mr Anwar’s appointment on Nov 24 - the largest single-day gain since March 2016. 

He noted that predictably, the ringgit has not seen similar gains since. 

“In November, the ringgit strengthened primarily due to the semblance of political stability post-election. However, it has since depreciated due to external factors such as the (US Federal Reserve’s) highly aggressive interest rate hikes, the US banking crisis and geopolitical uncertainties,” said Mr Afiq Asyraf. 

Mr Hafidzi Razali, a senior analyst with strategic advisory firm Bower Group Asia, added the weaker ringgit recently can be attributed to China’s ongoing economic recovery.  

“Given that China is one of Malaysia’s largest trading partners, China’s economic recovery is important for the value of (the ringgit),” said Mr Hafidzi. 

He noted that Malaysia’s exports had contracted 1.8 per cent year on year in the first quarter of 2023, and that this could largely be attributed to the decline in exports to China. 

Domestically, Mr Hafidzi posited that Malaysia’s relatively weaker investment opportunities and impending structural reforms have held back the ringgit’s value. 

“Private investment opportunities remain relatively limited; compared to developed economies such as the US and Singapore,” said Mr Hafidzi. 

“The market is still anticipating whether impending structural reforms will be implemented (by the Malaysia government); particularly on large subsidy bills, low tax base and the ability to attract value-added foreign direct investments,” he added. 


Analysts whom CNA spoke to added that the value of the Singapore dollar to the Malaysian ringgit could spike to new highs in the near term especially if the US dollar continues to appreciate.

However, some have stressed that the Singapore dollar to Malaysian ringgit value would stabilise given that the US government has agreed to raise the debt ceiling and that Congress would vote on the deal on Wednesday. 

After the agreement was announced on Saturday, US President Joe Biden said that the deal was "good news for the American people, because it prevents what could have been a catastrophic default and would have led to an economic recession, retirement accounts devastated, and millions of jobs lost".

The tentative agreement to suspend the US$31.4 trillion debt ceiling must now get through the Republican-controlled House of Representatives and Democratic-led Senate before June 5 to avoid a crippling first-ever default.

Mr Saktiandi said that the ringgit could breach to a new low of RM3.45 against the Singapore dollar if “USD strength continues”. 

“In the near term, we do not rule out the possibility that the US dollar to Malaysia ringgit value could still be moving further upwards, given that global sentiment could be subdued for a while still,” he said. 

“However, we believe the situation should gradually turn, and we see the medium-term outlook for the Malaysian ringgit as still positive,” added Mr Saktiandi. 

He explained that in the coming months, the US Federal Reserve could adopt a hawkish stance if inflation falls and this may lead to the US dollar unwinding. 

"Also, China’s economy could show a more discernible recovery by the fourth quarter, possibly boosting appetite for regional emerging market assets,” he said. 

“This points to the Malaysia ringgit seeing heavier gains once the global situation changes,” Mr Saktiandi added.

Kenanga’s Afiq Asyraf also acknowledged that the ringgit could weaken against the Singapore dollar to 3.45, but he maintained that the fundamentals for the Malaysia ringgit remained solid and that any spike “should be temporary”.

He added that the announcement on Sunday that the US has reached a deal to raise its debt ceiling will likely lead to “a recovery for the Malaysia ringgit”.

“Moreover, if the Fed pauses in its June meeting and signals a more dovish stance, it could further strengthen the ringgit,” said Mr Afiq Asyraf.

“The ringgit's strength will be supported by Malaysia's robust economic fundamentals and relatively stable political environment,” he added.  

Read this story in Bahasa Melayu here.  

Source: CNA/am(as)


Also worth reading