KUALA LUMPUR: The ringgit has reached a new record low against the Singapore dollar just a day after 3.56 to the Singapore dollar.
As at 9am, the middle rate was at 3.5725.
This was as the ringgit's middle rate hit 4.802 against the US dollar.
Center Market Education (CME) chief executive officer Dr Carmelo Ferlito said the swift strengthening of the Singapore dollar compared to the ringgit might be influenced by lower expectations for economic growth following 2023 gross domestic product of 3.7 per cent.
"The Singaporean dollar plays, at regional level, a bigger role as reserve of value when compared to other currencies: a sort of mini-dollar, so to speak."So there is a higher demand in moments of uncertainty. This is supported by higher interest rates," he added.
Ferlito added that higher interest rates may play in favour of the Singapore dollar, but the ringgit could be supported by better policy clarity and directions.
"There is not much more that BNM could do within the framework of Malaysia, with the inflation rate at 1.5 per cent," he continued.
Moreover, he noted that the prevailing atmosphere of uncertainty tends to benefit currencies acknowledged as stores of value, with the US dollar serving this role globally and the Singapore dollar fulfilling it regionally.
He attributes the relative strength of the Singapore dollar compared to the ringgit to the higher inflation experienced in Singapore, which has prompted its central bank to adopt a more restrictive monetary policy, resulting in higher interest rates compared to Malaysia.
"Such higher rates in turn translate into an incentive in attracting capital," he said.
Secondly, Malaysia's policy direction remains unclear and conflicting signals keep on being sent out, with the government stubbornly insisting on counterproductive topics such as the bumiputera agenda or new price controls or government-supplied products," he told Business Times.
Ferlito stated that essential reforms, such as the implementation of business-friendly regulations or the streamlining of subsidies, continue to be postponed.