Wednesday, August 12, 2015

USD-MYR: Does It Ring A Bell?

Yesterday, our Ringgit weakened further. The USD:MYR exchange rate surpassed the psychological 4.00 mark momentarily before closing at 3.98357.


Chart 1: USD-MYR's daily chart as at Aug 11, 2015 (Source: XE.com)

From the long-term chart, we can see that the USD:MYR exchange rate has a strong resistance at 3.80. The 3.80 level - which is much more significant than the 4.00 mark - was violated in early August. This breakdown plus the test of the psychological 4.00 mark are clear signs of the bearishness of our Ringgit. There is strong probability that we may revisit the high of 4.20-4.30 recorded during the Asian Financial Crisis in 1997-1998. Except for the political crisis, Malaysia is in a much stronger footing now than 1997-1998. If our present political crisis can be resolved quickly - I suspect it will - then we may see a sharp reversal in our exchange rate. If that were to happen, our stock market will enjoy a big boost!


Chart 2: USD-MYR's monthly chart as at Aug 11, 2015 (Source: TradingEconomics.com)
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2 comments:

  1. Black InkThursday, August 13, 2015 10:44:00 AM

    Hi Alex,

    ...There is strong probability that we may revisit the high of 4.20-4.30 recorded during the Asian Financial Crisis in 1997-1998.

    Agreed. This should have happened much earlier if not for BNM intervention.

    ...Except for the political crisis, Malaysia is in a much stronger footing now than 1997-1998. If our present political crisis can be resolved quickly - I suspect it will...

    Disagree. Things will get worse in the markets and politically before they get better.

    Using http://www.bloomberg.com/quote/USDMYR:CUR

    We find that the decline in MYR over the last 12 months (26.08%) is actually in-line with some developed nations with better credit outlook USDNZD (27.4%), USDAUD (25.6%), USDJPY (21.44%).

    EURUSD (16.4%) and USDCAD (18.86%) have faired a bit better over the same timeframe.

    Only USDBRL and USDRUB have taken a pounding > 52% decline. We have corruption and political uncertainty in one and sanctions in the other. Could the ringgit fall to join these two? I sincerely hope not.

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  2. Alex LuThursday, August 13, 2015 2:44:00 PM

    Hi Black Ink

    Thanks for sharing. I agree that things could get worse before a recovery takes place. The longer our political situation remains unresolved, the worse the economic situation will get. Najib holds on power is extremely untenable. I think he would step down in a matter of weeks. If & when it happens, I expect stock market & the Ringgit to snap back strongly.

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