Singdollar rises strongly against Malaysian ringgit

The Singapore dollar has risen strongly against the Malaysian ringgit to a four-month high, in a boon for locals travelling or shopping across the Causeway. -- PHOTO: BLOOMBERG
The Singapore dollar has risen strongly against the Malaysian ringgit to a four-month high, in a boon for locals travelling or shopping across the Causeway. -- PHOTO: BLOOMBERG

S'pore's stability supporting its currency amid an outflow of funds from the region

The Singapore dollar has risen strongly against the Malaysian ringgit to a four-month high, in a boon for locals travelling or shopping across the Causeway.

In the last two weeks alone, the Singdollar has surged about 1.1 per cent to RM2.6054 yesterday, from RM2.5767.

Since May 22 last year, the local currency has gained a hefty 8.8 per cent against the ringgit.

However, shoppers will not be able to obtain quite the current money-market rate of RM2.6054 at money changers, who add their own margin to make a living.

The current rate offered by a local money changer is more likely to be about RM2.575 to S$1.

Currency analysts say that Singapore's status as a regional safe haven is helping to support its currency, as funds flow out of the region back to developed markets such as the United States.

Singapore is less vulnerable to currency outflows, as opposed to the ringgit and other South-east Asian units like the Indonesian rupiah and Thai baht.

But it is not that the Singdollar is getting stronger - just that it is weakening against the US dollar less dramatically than the ringgit, for instance.

Regional currencies had been boosted in the years after the 2008 global financial crisis, as the European and US central banks printed vast sums of money to boost their flagging economies.

With rates and yields low at home, wealthy Western investors flocked to South-east Asia and other emerging markets seeking better returns.

The money that they moved here boosted regional currencies.

But that era is fast coming to an end, with the US Federal Reserve this month reducing its bond purchases, and thereby pushing up US yields.

As a result, investors are moving money out of this region, which is hurting currencies in South-east Asia.

"In 2014, we expect money to move out of this region to go back to the US," said Mr Wu Mingze, a market analyst at forex trading firm Oanda.

"The Malaysian ringgit is weakening, but the Singdollar is not doing too well against the US dollar either. It is just doing comparatively better relative to other South-east Asian currencies."

The ringgit has lost 12.6 per cent against the greenback since last May, to RM3.3267 to US$1 yesterday.

The Singdollar, however, has lost only 4.1 per cent against the US dollar over that period, to yesterday's money-market rate of US$1 to S$1.2791.

The Singdollar has lost 0.89 per cent against the greenback in the past fortnight, almost half of the ringgit's 1.65 per cent drop.

"In Singapore, we are unique in that rich people from China and the US will still want to put some money here due to the stability and infrastructure," said Mr Wu.

"This helps the Singdollar to remain strong."

In Malaysia, there are comparatively fewer major investments and infrastructure developments, he added.

"It's a comparison of who's the biggest loser, rather than the Singdollar actually strengthening."

jonkwok@sph.com.sg

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