Major central banks were aggressively hiking interest rates to combat inflation after COVID-19 lockdowns. While the US Federal Reserve increased rates by 525bps, Malaysia’s OPR rose only 125bps in the same period. This contributed to the ringgit’s decline against the US dollar, down 5.4% in 2022, 4.1% in 2023, and 3.1% year-to-date. Regional and emerging currencies also depreciated, weakened by 9 to 25% against the dollar.
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Strong US Dollar
Uncertainties over China’s economic growth and recent geopolitical crises further boosted demand for the US dollar as a safe-haven asset. Since the beginning of 2022 to now, the ringgit traded stronger against the Japanese yen, Taiwanese dollar and the Korean won[1] while only marginally weakening against the Chinese renminbi, the rupiah and rupee[2].This also affirms the view that we are facing more of a US dollar strengthening cycle, a US dollar story and not a ringgit weakness story, says Deputy Governor Adnan Zaylani.
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