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Foreign Exchange Outlook: The US, the Eurozone, and Malaysia

PART:
1 2 3 4
Part 2
Foreign Exchange Outlook: The US, the Eurozone, and Malaysia PART 2 OF 4

The Malaysian Ringgit Falls to a 17-Year Low

Ringgit near pre-pegging levels

The week ending 14 August, 2015, saw the US-dollar-to-Malaysian-ringgit (USD-MYR) currency pair fall below the psychologically significant level of 4.0, ending the week at 4.0690. This is a level not seen in the currency pair for the last 17 years. The currency pair was last at this high level during the Asian financial crisis of 1997. The Bank Negara Malaysia (the BNM) had kept the currency pegged to the US dollar for nearly seven years at 3.8.

The Malaysian Ringgit Falls to a 17-Year Low

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Five main drivers of the fall

The Malaysian Ringgit Falls to a 17-Year Low

Please see Asian Currencies Follow China’s Cue of Yuan Devaluation for the effect of last week’s Chinese yuan devaluation on Asian currencies.

Impact on the market

The iShares MSCI Malaysia ETF (EWM) continued its fall for a tenth consecutive day. It fell 2.17% on August 14. The Emerging Markets ETF (VWO) ended a week of dismal performance with a slight uptick of 0.30% on Friday.

Asian ADRs (American Depository Receipts) stabilized on Friday after a highly volatile week of trading. Infosys Limited (INFY) experienced a slight dip of 0.33%. A similar trend occurred for retail giant Alibaba Group Holdings Limited (BABA) as the ADR experienced a less volatile day compared to the week and ended with a drop of 0.47%. Sony (SNE) rose slightly and ended 0.56% higher.

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