It is not an interest for BNM to prop up RM.
No point to prop up your currency at current scenario, as long as it is not plunging excessively.
Whether got "gun powder" or not, doesn't matter.

China has trillions of "gun powder" of USD foreign currency reserves, they also don't want to prop up Yuan.

It is pointless to prop up your currency by using the foreign currency reserves.
Let the open market 'decides" as long as it is not overly.

The currency war is about everyone country want to rush their currency to the lower side.
LOL, a bit crazy, right?

Interest rate shouldn't be shooting to the roof, unless Fed decided to hike rate to more than 2~3% which chance is remote for the next few years down the road.
With commodities price are low across, be it iron ore, oil, CPO, inflation is expected to be tame, that won't prompt Fed to hike rate too much.

Sentiment towards RM is poor, so weakness of RM still can be seen for near term.

1) Foreign currency reserves dropping not necessary must BNM intervention.
Any ordinary outflow of investment money from stock market, bond market, corporate investing into foreign asset etc, also will cause the foreign currency reserves to go lower, without BNM intervention in the forex market.

Even the country has surplus in trade, it may not directly translate into current account surplus equivalently.
eg.
A company here export USD 100 mil of goods to US, the company will receive USD 100 mil, if the company exchange the USD100 mil to RM through bank here, then BNM will take the USD 100 mil and give equivalent exchange amount of RM to the company. Now BNM has USD 100 mil in the foreign currency reserves.

What if the company decided not to exchange the USD100 mil, and park at offshore bank or in US, then there is no exchange between USD and RM, in this scenario, BNM never receive the USD100 mil, hence we won't see any increase in foreign currency reserves despite having a trade surplus of USD 100 mil.

Thus the
so called trade surplus in BNM statistic is incorrect. Because it has included offshore Malaysian held account that may never return to Malaysia.

Malaysia in fact has double deficit now in trade accounts and service account. if the above is taken into consideration.


This post has been edited by cherroy: Aug 17 2015, 12:52 PM

Wrong on accusing BNM statistic is incorrect, trade surplus is about export - import of goods.

Capital flow investment is not counted as trade surplus. The term "trade" is business export import.

You need to look at current account surplus/deficit for further dig into capital flowing issue.

Please do not post any political or political linked issue.
It is allowed in finance section to prevent topic being derailed.
Ty.

1.00 USD = 4.11 MYR

Got informed from my forex local depositor.
Withdrawal rate is RM4.10 now..

Submitting another 20% of my find this weekend. Hehehe

So we buy USD and hold now eh. Plus I have 2 years left of study in the U.S.

u didn't do that a couple of months ago when it was 3.8 or so?

I think for the USD to appreciate beyond RM4.5 to USD1, Malaysia economy has to show a trade deficit (import total more than export total ).

So my question is would it be possible for Malaysia to have a trade deficits ? So far CIMB bank research say not this year and the RM7.6Billion
trade surplus for Q2 in impressive...Reasons for trade account deficit can be commodity price slump, manufacturing sector scaled down or moved
out of Malaysia etc

Someone should also explain how BNM can compute trade balance in our GNP calculation. Cherroy say some point then refute it.
The govenment has hide government borrowing using Pembinaan PFI like paying rent on own properties, now they can manipulate trade balance too..

This post has been edited by 2malaysia: Aug 17 2015, 02:11 PM


Attached thumbnail(s)

should have done months back..

now the rate is kinda unfavourable high, but it might even get worse soon

is he your older brother?
https://forum.lowyat.net/index.php?showtopi...673846&hl=raise

This post has been edited by green_algae: Aug 17 2015, 02:15 PM

Incorrect.

When your currency become "cheap", more MNCs like to use your country as manufacturing hub, labour wages become cheaper in term of USD, they can profit more by setting up factory here. Hence you will have more export increase.

While, when your currency depreciated, import goods become more expensive which hinder consumer to consume more import goods, which resulted a big shrink in import.

Currency rate drop, more export, shrink in import, you will have more trade surplus.

1998 Asian financial crisis already shown how trade deficit previously being turned into trade surplus after the currency rate dropped down significantly.

There is no incentive to manipulate trade balance figure, nobody can benefit nor lose from it.

Fyi, Malaysia was in continously trade deficit situation prior 1997, but RM was at Rm2.5 vs 1 USD at that time.
Only turn into surplus after 1998 when currency was pegged at RM3.80.

I am not seeing anything close to above in Selangor. Maybe in Penang but not in Selangor.

From a few of your post above, you emphasized on the advantages of cheap currency. There are also the disadvantages of currency devaluation

One being the inflation rate will spike. Fuel, consumable goods, raw material, machineries will be inflated. This will be reflected in inflation rate eventually. Then wages will be pressured to increase which will again fuel inflation. Interest may need to be increase to curb spending and further increase the cost of doing business. It is a spiral.

There are always 2 sides of currency devaluation. A sudden and severe devaluation like now will shock the economy and the effect will be felt in the coming weeks. Today, my supplier already inform us the price increase for our raw material. We expect more suppliers will have no choice but increase their price. And eventually we have no choice but to pass the costs to our customer too

But for now. Not comparing 97, currency down do more harm then good.

Dude, even we cook at home also need value to eating outside few months ago....

A bunch of Choi Sam, Siu bak Choi, also need 2 myr....

Last time was 1 myr and more.

Now I even started gardening and guess what pucuk ubi or shu miu grow really fast and nice to eat!!! Kangkung and mint leaves also easy to plant!!!

I never said cheap currency is good, in fact cheap currency means purchasing power shrink, our pocket money shrink, our wealth shrink as well.

I just intend to correct the wrong statement that cheap currency may drive up trade deficit.
I never said which side is good or bad.

Cheap currency to grow the economy is like a "poor man tool" that should be used at last resort, as public need to pay a price for it in term of suffering inflation and purchasing power if using this route.

Economy growth should create more wealth and improve our purchasing power, this is the ultimate goal of economy growth.
Stable currency and stable growth is what should be aim for.

the way i see it, the rm has been too strong.
trade surplus yes but... capital flight, incr debt, incr food/essential goods imports, persistent budget deficits are overwhelming.
now with falling crude and cpo prices, things have to correct.
can't have good life, high consumption for too long on debt w/o producing and earning more from trading partners.
result is falling standards of living.
it will become very apparent in the next few years.
some malls will become glorified pasar malams.
luxury hotels and restaurants will be confined to the super rich and politicians.
more local tertiary institutions will spring up as fewer can afford it abroad.
more foreigners and illegals will arrive as attempt to keep costs low in all fronts.
more corruption and crime as the masses struggle to live day to day.

for the ordinary fella, a weak currency bring more hardship than goodness. i wish for a stronger currency.

the old man wrote this after me, seems he agrees with me!



and the world community knows. msia and turkey in world news often these days:



This post has been edited by AVFAN: Aug 17 2015, 07:24 PM

If currency drop because of multiple qe to stimulate the economy and drive up business n growth, thats ok.

If the currency drop because foreign fund exit and dumping equity.. tats bad