The Singapore dollar has managed to reach an all-time high against the Malaysian ringgit recently. This highlights the significant policy gap between the two nations which seems to continue to grow.
As at Tuesday, 24 October 2023, the Singapore dollar had managed to reach a new high of 3.5086 against the ringgit.
According to Bloomberg, the exchange rate first breached the 3.5 mark earlier on Monday. The rate then began to fluctuate for some time, but for the most part, was hovering over the 3.5 mark overnight until the next morning.
According to reporting by the Business Times, SPI Asset Management managing partner Stephen Innes had said that this is likely the result of the Monetary Authority of Singapore (MAS) being more aggressive on policy.
Innes also highlighted Malaysia’s bigger dependency on the Chinese economy. China’s current economic woes have in turn affected Malaysia’s economy. However, Singapore remains insulated against the economic downturn thanks to robust banking sectors. Hence, there is a bit of a safe haven appeal for Singapore dollar amid the regional basket, according to Innes.
Innes also mentioned that Malaysian banks including CIMB Bank Bhd and RHB Bank Bhd are enticing investors and savers with an impressive 4.0 percent one-year deposit rate in Singapore dollar.
In contrast, the local banks are offering a modest 2.0 percent to 2.75 percent on one-year ringgit deposits. These tempting opportunities have resulted in an exodus from the ringgit to Singapore dollar, which could be another factor for the weakening of the ringgit.
They include differences in economic growth, inflation and interest rate differentials between Malaysia and Singapore can significantly affect exchange rate movements.
Read More: 9 Lifestyle Adjustments To Survive The Weakening Ringgit
