Singapore money changers ran out of RM after historical rate

Money changers in Singapore on Friday ran out of Malaysian ringgit notes after the favorable exchange rate sparked strong interest from buyers taking the chance to stretch their dollar by picking up ringgit on the cheap. The Singapore dollar is trading at one to 2.51 Malaysian ringgit, after hitting a 14-year high against the Malaysian currency this week.

The ringgit is under pressure as Malaysia’s general election looms and as investors exit emerging Asian markets for safer assets.

Sim Moh Siong, a currency strategist at Bank of Singapore, said: “I think part of the under-performance could be due to the drop in commodity prices, especially in terms of crude oil and palm oil, which made up a significant amount of Malaysian exports. That seems to be an overhang on the ringgit.”

Currency analysts said the ringgit could weaken further this year, on risks from Malaysia’s upcoming general election. This could push the Singapore dollar to 2.55 versus the ringgit within the year, but should be back to 2.45 by end of 2013.

Singapore Dollar is widely expected to fetch 2.55 Ringgit by the end of the year

Saktiandi Supaat, who is head of currency research at Maybank, said: “It’s a reflection also of how market participants see Malaysian assets and also the tolerance level of Bank Negara in terms of allowing some flexibility in the ringgit. The Ringgit has reacted more than the Singapore dollar to Eurozone and global financial risks, while the structural issues on Singapore dollar restrict the way it reacts.”

Global economic uncertainty has caused investors to pull money out of riskier assets like emerging-Asia currencies as they opt for safe haven assets like the US dollar. The Singapore dollar is also one of the world’s safest currency, as seen in that it has appreciated 2.5% against the Thai baht and Indonesian rupiah this year.

Lee Chen Hoay, an investment analyst at Phillip Futures, said: “Because of the Eurozone crisis, it has increased the risk aversion in the market. And you even see things like Switzerland and Denmark being able to issue bonds at negative yield. So that means investors are willing to pay more money to get less, and to protect their capital. And Singapore, being the only Southeast Asian currency with triple A credit rating, has an increased appeal.”

Malaysia is scheduled to let Ringgit weaken further in response to global crisis

Analysts however said that the Singaporean government would not allow Singaporean dollar to appreciate too much. Should the Singapore dollar continue strengthening versus the ringgit, Singapore companies with operations in Malaysia could see profits taking a hit. On the other hand, Malaysian authorities have more incentives to weaken currency, not only it boosts export competitiveness, Malaysian companies with operations in Singapore and elsewhere may see currency gains as they repatriate profits.

Source: … an-ringgit … 05/1/.html … aysian-run

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