Ringgit level is 4.78 today, the highest level for the past 22 years. The climbing dollar and weakening ringgit have been the conversation in both the financial market and political circle for the past two weeks.
The opposition narrative will be to use a shallow political argument to blame the Unity Government Prime Minister, Anwar Ibrahim as incompetence or surprising to come from PN, accusation of corruption.
The counter argument is the legacy left by the previous administrations of Mahathir, Muhyiddin and Ismail Sabri which saw debt surpassing RM1.0 trillion from the RM688 billion left by Najib.
Be it inherited or self imposed, there is no denying there are economic issues faced by the Unity Government. And, it is not only Ringgit that is weakening against the US. However, the Ringgit not only weakened against dollar but also against other currencies such as Singapore dollar, Thai Baht, and Japanese Yen.
The hunch is the bigger impact on Ringgit is geo-global politics in nature. There could be a retaliation against Malaysia for its strong position on Palestine.
Though Anwar is careful to not commit support for Hamas, reiterate the commitment for Palestine is for humanitarian support and call for peace, he acknowledge knowing Hamas. Apparently the American do not take kindly to it.
Hamas has affiliation with Ikhanul Muslimin, which in turn has links with Anwar’s ABIM and PAS. PAS was instrumental in pressuring Malaysia to send its military to Gaza.
In fact, a Hamas activist in Malaysia expected a stronger position from Anwar in an interview on Khairy Jamaluddin’s radio talk show. It could be reaction to the politically and militarily infeasible demand for Malaysian millitary participation rejected by Anwar.
This time around the Israeli narrative to label Hamas as terrorist gained international support and silenced the majority of Muslim countries. It gave the Israeli the excuse to evacuate Palestinians from Gaza.
Hamas first strike using their “home-made” rockets surprisingly managed to penetrate Israel’s impenetrable iron dome. Lost in the international media propaganda is the fact that Hamas was a creation of the Israeli and it was acknowledged by the Americans.
The dilemma and international pressure faced by Anwar could be felt during the weekend rally for Palestine organised by Viva Palestina and pro-Pakatan Harapan NGOs.
Host, Dr Musa Nordin harshly called those displaying devilish depiction of Netanyahu as Malay Zionist. There were claims takbir calling of Allahu Akbar and any mention of the term Zionist disallowed.
Situation must be delicate to warrant such precaution.
The American and NATO seemed to conveniently used Gaza as the launch pad on Iran, to gain absolute control of the Middle East and send a message to Russia and China.
Ukraine lost control of the Eastern region and Crimea to Russia. The US and NATO backed regime lost the war but it is intentionally prolonged. Geopolitical analysts went as far as prediction a new milleneum version of World War III.
Though Asia is a distance away from the theater of operation, the hawkish American have been persuading Taiwan for a war against China. Any tension on the South China Sea will put neutral Malaysia in a difficult situation.
China is its major trading partner but it has a 9-dash line claim on the territory of Malaysia in the South China Sea. It will put Malaysia in a bind between the two superpowers. It need help from the West to protect its sea border, but the US pressure on Palestinian issue puts Malaysia in a dicey position.
Anwar knows the risk of being vocal for the Palestinian. And ringgit becomes the easy target for attack.
Unlike US dollar, Ringgit is not backed by air craft carriers to be a safe haven currency whenever political crisis arise. Declining export, significantly due to structural issue facing the Chinese economy, made Ringgit inelastic or not responsive to any correctional movement.
Interest rate differential between the USD and Ringgit is the major underlying factor in determining the Ringgit’s trend vis-a-vis the dollar whether it is bullish or bearish.
Howver, the successive Malaysian administrations are reluctant to raise interest rate and close the gap with US interest rates for fear it will worsen the already struggling local economy.
Federal Reserve held back from hiking interest rate last week, but the fear is not over. The concern on the inflation situation in the US remain. Market expect a 25 basis point hike by December and at least two 25 basis points hikes for 2024.
Ringgit is at a 22 month low. Though not at the all time high of 4.88 during the currency crisis of 1998-2000, interest rate for the US coincidentally is at 22 year high.
The prejudicial presumptions made on Najib and opinionated views on Palestinian, extremism and Malay voters are not agreeable, but the latest from Finance Twitter below touched base with similar geoglobal reason for the decline of Ringgit vis-a-vis the dollar:
Silly Anwar is the only state leader, besides the regime in Tehran, to publicly declare Hamas terrorists were his brother. After Washington showed its displeasure over his support for the terror group, the European Union might reconsider its economic relations with Malaysia. Yes, Anwar’s stance is problematic due to previous reports that uncovered a training program in Malaysia from 2012 that trained Hamas fighters how to fly powered parachutes.
If the U.S. and E.U. decide to slap economic sanctions (or restrictions) on Malaysia, the Ringgit would be lucky if it could remain at RM5 to the dollar, and not plunge to RM6 and beyond. Unable to differentiate between Hamas and Palestinians, Malaysia is asking for trouble by trying to justify Hamas’ terrorism, which has killed more than 1,300 civilians.
Ringgit is internationally traded, thus any analysis cannot be confined to local political perspevtive and Malaysian economic development. It is more relevent now that the geoglobal political tension is on escalation mode.
Source : Thick Brick Blogspot