Sample Assignment of Assessment for Ringgit Malaysia in 2009 and 2010

Assalamualaikum..a little help for our friends out there yg still tercari2 sample assignment for subject International finance, assessment of RM in 2009-2010. Nisa ambik US dollar sebagai perbandingan.
(RM/USD)

Exchange Rate USD to RM in 2009 and 2010
Year 2009	Rate		Year 2010	Rate
January	3.068		January	3.411
February	3.692		February	3.402
March	3.647		March	3.262
April	3.56		April	3.184
May	3.487		May	3.261
June	3.515		June	3.237
July	3.522		July	3.181
August	3.521		August	3.149
September	3.461		September	3.084
October	3.412		October	3.109
November	3.392		November	3.167
December	3.423		December	3.064
Average rate	3.475			3.209
of the year

  Ringgit Malaysia Assessment in 2009

            Political history uncertainty following the country's 2008 general election and the 2008 Permatang Pauh by-election, falling oil prices, and the lack of intervention by Bank Negara to increase already low interest rates (which remained at 3.5% since April 2006) led to a slight fall of the ringgit's value against the US dollar between May and July 2008, followed by a sharper drop between August and September of the same year. As a result, the US dollar appreciated significantly to close at 3.43 to the MYR as of September 4, 2008. The drop brings the ringgit to its weakest since September 24, 2007, and ranks it as the second worst performing Southeast Asian currency between June 2008 and September 2008.

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Graph for Malaysian Ringgit (RM) against US Dollar (USD) are displayed in the chart above. The values in the graph are based on the exchange rates obtained from the monthly-updated database.  As example on Jan 2009 the RM had enjoyed a period of appreciation at (RM3.068/USD), but the currency decline at sharper drop or depreciated to 3.692 against USD in Feb 2009.  The main reason behind this is inadequate investment after the Asian financial crisis. Gross Domestic Investment dropped from a peak of 43.6% in 1995 to 19.6% in year end 2008. This momentum of RM depreciation continues until April 2009 at average rate RM3.60/USD.

 Since in the beginning of 2009, the ringgit has lost almost 6% of its value against the US Dollar. This depreciation of Ringgit value is primarily due to the declining demand in exports and portfolio capital outflows. But the depreciation of Ringgit may help to improve the export performance of Malaysia, limiting the negative impact from global recession.

The current assessment is that the domestic economy is expected to improve in the second half of 2009, supported by stabilisation in global economic conditions and the larger impetus from the implementation of the fiscal stimulus measures. In May 2009, Ringgit slowly recovered by appreciated at RM3.487/USD. Then slightly declining in Jun 2009 to August 2009 at average rate of RM3.50/USD. From September 2009 to December 2009 showing that ringgit currency appreciated back at RM3.461/USD to RM3.423/USD.

Malaysia was hit hard by the global financial crisis of 2008-09. Anticipating the downturn that would follow the episode of extreme financial turbulence, Bank Negara Malaysia (BNM) let the exchange rate depreciate as capital flowed out, and pre-emptively cut the policy rate by 150 basis points. Furthermore, had a fixed exchange rate regime been in place, simulations indicate that output would have contracted by -5.5 percent over the same four-quarter period. In other words, exchange rate flexibility and the interest rate cuts implemented by the BNM helped substantially soften the impact of the global financial crisis on the Malaysian economy. 

            Ringgit Malaysia Assessment in 2010

Ringgit was the best performing Asian currency in year 2010. 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 unexpected move in being the first central bank in Asia to raise interest rate. 

In January to February 2010, Ringgit appreciated against US dollars at RM3.41 to 3.40/USD. Ringgit at the best performance of appreciation throughout this year at average RM3.20/USD. The highest exchange currency was in January at RM3.41/USD and the lowest exchange rate was in December 2010, Ringgit appreciated at 3.06/USD.

The reason of stronger Ringgit are; firstly the implications for bond investors. This means that Malaysian investors who have invested into non-Asia foreign-denominated bonds might suffer from currency loss. As such, investors are advised to focus on ringgit denominated bond funds as opposed to global bond funds. Secondly, better than expected GDP Growth. The strength in ringgit was supported by better economic fundamental. Malaysia registered better than expected recovery in its 4Q 09 economic growths. The country posted a 4.5% year-on-year GDP growth, backed by improving external and domestic demand.

Third reason is Bank Negara Malaysia increase ‘Overnight policy rate’ (OPR) by 25 basis points (bp) to 2.25% in March. Malaysia was the first country in Asia to raise interest rate. Typically, ringgit appreciates when foreign demand for Malaysia debt securities increases. Before the rate hike announced on 4 March, ringgit increased only 1.0% against USD month-on-month, after the surprised hike, ringgit increased by 3.8%, a month after the rate hike.

 Forth reason is further increase as Chinese Yuan is expected to increase and ringgit typically increases with the appreciation of Yuan. Global imbalances have been a hot topic for debate in the recent years. The US and European countries are blaming Asian countries, especially China, for suppressing the strength of their currencies to give their exports an unfair cost advantage. The China Yuan against USD has been pegged at 6.83 since July 2008 as part of the government’s effort to weather the economic downturn.