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Why Ringgit Always So Weak (and will Stay Weak FOREVER) vs USD & SGD
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Why Ringgit Always So Weak (and will Stay Weak FOREVER) vs USD & SGD

Why is the Ringgit weak against other currencies?

This section discusses the reasons behind the weakness of the Malaysian Ringgit against currencies like the US Dollar, Singapore Dollar, Euro, and Pound Sterling.

Factors affecting currency strength

  • The Ringgit's weak value is a nightmare for Malaysians as it reduces their purchasing power and increases the cost of imported goods.
  • The exchange rate is influenced by interest rate differentials between countries. Higher interest rates in one country attract more foreign investment, strengthening its currency.
  • Countries that increase interest rates tend to have stronger currencies, while those cutting rates may experience weaker currencies.
  • China intentionally keeps its currency weak to support its export-heavy economy. Malaysia has a similar approach due to being an export-oriented nation.

Role of interest rates

  • Interest rates play a significant role in determining currency strength. Central banks adjust interest rates based on economic data such as inflation, employment, and GDP growth.
  • A strong currency and low-interest rates are incompatible. A strong Ringgit would make exports less competitive but could benefit consumers traveling abroad or buying foreign goods.
  • Keeping interest rates high solely to strengthen the currency can be politically unpopular as it leads to higher borrowing costs for citizens and government expenses.

Singapore's unique approach

  • Singapore does not follow conventional rules regarding interest rates. Instead, its Monetary Authority uses alternative methods to manage its currency.

Japan's low-interest rate strategy

This section explains Japan's intentional maintenance of low-interest rates to combat deflation and stimulate economic growth.

Japan's experience with deflation

  • Japan suffered from severe deflation in the past, leading to stagnant economic growth for decades.
  • To prevent further deflationary pressures, Japan keeps its inflation target at 2% by maintaining low-interest rates.

Malaysia's interest rate and currency stability

This section discusses Malaysia's approach to interest rates and the stability of its currency.

Inflation control and currency stability

  • Malaysia has halted interest rate hikes as inflation appears to be under control.
  • The Ringgit has depreciated against currencies like the US Dollar, Singapore Dollar, Euro, and Pound Sterling but remains stable against the Chinese Yuan and Japanese Yen.

Central bank's role in monetary policy

  • The central bank adjusts monetary policy based on economic data, aiming to maintain stable domestic prices, moderate economic growth, and employment opportunities.
  • Forex intervention is another tool used by central banks to influence exchange rates.

Trade-offs between currency strength and cost of living

This section explores the trade-offs between a strong currency and a high cost of living or a weak currency with a low-interest rate.

Currency strength vs. cost of living

  • A strong currency allows for cheaper foreign travel and purchases but can lead to higher mortgage repayments.
  • A weak currency results in a higher cost of living but may support export-oriented industries.

Political considerations in managing currencies

This section highlights the political challenges associated with managing currencies and interest rates.

Political implications of high-interest rates

  • Governments are reluctant to raise interest rates significantly as it burdens citizens with higher borrowing costs.
  • High-interest rates can hinder economic growth, limit job creation, reduce foreign investment, and increase government expenses.

Populist governments' approach

  • Populist governments often prioritize short-term popularity over long-term economic stability.
  • Delaying necessary reforms can lead to passing problems onto future administrations without addressing underlying issues.

Singapore's unique currency management

This section discusses Singapore's unconventional approach to currency management.

Singapore's alternative methods

  • Singapore's Monetary Authority does not rely solely on interest rates to manage its currency.
  • The specific methods used by Singapore are not elaborated upon in the transcript.

The summary has been provided in English, as requested.

New Section

The speaker discusses the currency exchange rate between the Malaysian Ringgit and the US Dollar, as well as the strength of the Singapore Dollar due to foreign investment.

Currency Exchange Rate and Foreign Investment

  • The infamous 3.8 Ringgit versus one US dollar currency pact from 20 years ago is mentioned.
  • Singapore's currency, the Singapore Dollar, is strong due to factors such as foreign direct investment and being a regional business and financial center.
  • Money flows massively into Singapore in the form of foreign direct investment or even foreign indirect investment.
  • Taylor Swift's concert tour in Southeast Asia only stopped in Singapore, highlighting its status as a regional hub.
  • However, the strong currency also comes with high costs of living, especially housing expenses.

New Section

The speaker discusses why cost of living, particularly housing expenses, are expensive in Singapore despite its wealth as a country.

Expensive Cost of Living in Singapore

  • Despite being a rich country, many Singaporeans feel stuck due to the high cost of living.
  • The speaker invites viewers to share their agreement or disagreement with this perspective.
  • Subscription to their channel is encouraged for more related content.
Video description

Why Malaysia Ringgit always so weak versus USD and SGD? Even weaker now vs euro and pounds sterling than 1 year ago?? But do you know, Malaysia interest rate OPR is also a major factor in weak Ringgit? ===== Get access to secret insider videos: https://youtube.com/playlist?list=PLQ7ZQik2O1aICJYZM7otRb1ARibrW2QHJ ✅Want 1on1 advice to solve 💰 issues? Start here: https://howtofinancemoney.com/contact-details?el=ytvideo ===== Interest rate differential between 2 countries (US & Msia) drives cross border money flows A country with higher Interest rate naturally attracts more foreign money, all other things equal Example, when US FD gives 5% per annum bs M’sia FD gives 3% per annum, global investors flock to put their money into US FD, hence rising the demand for US Dollars, making it strong relative to Ringgit Malaysia economy and Ringgit is actually pretty similar to China in this way China intentionally keep its Reminbi Weak vs USD so it is an export heavy nation, making China goods cheap in the global market, Malaysia also export heavy economy right? See the similarity? Don’t you understand, it’s meant to be weak! If our Ringgit is strong, all export business in M’sia die kao kao oledi lo! That is why you see Ringgit has depreciated against USD, SGD, Euro and Pounds sterling but NOT against renminbi yuan or Jap Yen Why central banks so buntut gatal want to change interest rates? Can’t they keep it constant? Well you have to understand, the primary reason central banks exist is setting monetary policy – interest rate is just one of the tool besides forex intervention So you see, forex exchange rate & interest rate is like Siamese twin U can’t have a strong Ringgit AND a Low Interest Rate, it’s like against the Law of Nature You choose your poison: Strong Ringgit plus a High Interest Rate – which means cheap for you to travel overseas or buy your foreign goods, but your Mortgage repayments make you cry In other words, Strong Currency Comes with High Cost of Living and vice versa Or you choose Weak Ringgit plus Low-Moderate Interest Rate The other angle to look at the Reason for Weak Currency is this: Politically speaking, very few, if any, government in the world have the guts to hike interest rate too much just for the sake of strengthening its currency - coz then this causes High cost of borrowings Why? It is politically unpopular to make citizen the rakyat ‘suffer’ by paying more on their existing loans that result in less money to save or buy that concert tickets when their income is NOT growing coz high value high income jobs are not created in the country due to lack of foreign money invested into the country, And with dependency on foreign cheap labor, how can wages, salary grow? Any ruling government needs popular votes to stay in power see? Heck, don’t you know that every time central bank hike interest rate, government itself also suffers coz their expenses also go up as it needs to pay more interests on its very own gov debt? So imagine you are the PM in a populist government that needs to win next general election, what you do? You take the easy way out – ‘kick the can down the road’ everything stays as it is – nothing change, so you pass this problem to your successor, never mind if it’s 20 years from now – same problem In the meantime, ringgit continue to be weak lah! ===== CF Lieu is one of the most trusted & respected independent consultant in the financial advisory space in Malaysia. CF Lieu is also one of the rare financial planners aka financial advisers who is actually engaged by banks and financial institutions to conduct investment seminars & workshops - like Maybank, RHB, PNB (Permodalan Nasional Bhd), FPAM (Financial Planning Association of Malaysia)...where his audience include CEOs, CFOs, accountants, investment analysts, private bankers, relationship managers etc CF Lieu’s availability to work 1on1 with clients is extremely limited. As such, he's very selective and he is expensive (although it will be FAR less expensive than staying where you are). Many of his clients are seeing a positive return on CF Lieu’s advice in days, not months. See CF’s clients’ testimonials here - https://howtofinancemoney.com/testimonials3?el=ytvideo If you think you might benefit from one-on-one interaction with CF, visit https://cflieu.com #ringgitmalaysia #ringgit #weakcurrency