THE UNIMAGINABLE happened when in early August this year the MYR-USd exchange rate dipped below RM3! The good news is that this is happening not only in Malaysia but in most countries in the Association of Southeast Asian Nations (Asean) region (see Figure 1). Relatively speaking, comparing Malaysia to our peers, we are not too exposed. However, compared with the major markets in advanced economies, where the USD is used as an invoicing currency, Malaysian goods and services are becoming more expensive and thus less competitive. What are the factors behind the appreciation of various Asian currencies against the USD and what are the implications for the future?
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