The rising Ringgit

The Ringgit is doing pretty well since the beginning of the year. Against the US$, it has appreciated 7% in the last 3 months. It reached a level below RM3.2 to 1 US$ recently and is almost at a two-year high. The main reason for this bullishness is the optimism of a robust economy. The economy is expected to grow by 5.7% this year. Foreigners are also moving more money into the country to acquire assets.

The Ringgit has risen by a hefty 16% versus the US$ since the liberalization of the peg on 21 July 2005. Expectations are that it will rise further. This is because the Asia region economies are all expected to be doing very well in the next two years. The Chinese economy in particular is forecast to grow at a rate of 12% in the first quarter of this year. As a result, there is great pressure for the Yuan to be revalued. A surging Yuan will lend strength to the Ringgit and they will rise together.