The hedge will be good only if RM plunges 8% every year from now on.

Mind that USD/SGD carries virtually no interest currently.

Provided you get it right that RM continue to drop to 4.005, which only mean you get breakeven.
If wrong, you lose.

Summarise.
You have 50% of getting it right (the movement of RM to the downside further)
Yet you don't win even you get it right the 50%, you need more than Rm4.005.

So you chance of "winning" actually less than 50%.

Good deal?
Up to one to judge then.

Hedging against RM depreciation, not necessary must through direct conversion of cash money.
There are listed companies that will benefit from the RM depreciation, typically like glove company, whereby we see their share price appreciated more than 10~20% due to RM movement to downside. Same with investing in foreign denominated currency ETF etc.

There are plenty of options and alternative to hedge upon, not solely must direct through cash conversion.

The surprise better than expected export, and better trade surplus may cushion the weak RM.

Nevertheless, RM still being seen weak for near term.

BNM foreign currency reserves stood at USD96.7 bil as at end of July.

When the foreign currency reserves is not enough to cater for short term debt and import, then the country may need to seek for aid for it typically from IMF.

As import bill and capital outflow, you need to pay in USD.

Even without supporting the RM, the foreign currency reserves will keep on shrinking if the capital outflow is not reversing.

Whenever someone want to exchange RM to USD in Malaysia,
BNM needs to use the USD in the foreign currency reserves to pay for it.

Capital outflow, investors take RM exchange to USD before remit to overseas.

That's why it is important to have trade surplus, current account surplus, and FDI.
Export > import, potential more USD being exchanged to RM.
More investment money come in, investors bring USD to BNM to exchange to RM before invest into local asset.

Drop in RM that prompt more earning in USD cannot be offset by drop in commodities price.
While Petronas may export oil in USD, but its capex also in USD, aka equipment, tanker rate, all quoted in USD price one.

So does some plantation company that may be hurt by USD appreciation, as there are some large plantation company borrowing are in USD denominated.
At the meantime, CPO traded in RM doesn't rise, but down, despite with RM depreciation which in term of foreign buyers pov it has become cheaper.

The one benefit the most are those MNC set up here for cheaper production cost.
Last time, hiring engineer locally pay in RM (let say RM6K, which equivalent USD2K, from MNC they view in USD), now with RM4.00 vs USD, suddenly, they only need to pay USD1500.

While MNC import semi-processed goods (eg, chips) to produce into finished goods and export(eg, processor etc), all in USD, no impact at all.

For MNCs, goods in and out no effect from the RM, but massive saving in cost related here.

Since 1998 capital control, RM is not easily tenable outside Malaysia, so basically there is not much RM trading directly at overseas.

There is no rule how much USD needed.
It is about paying your import bill that majority in USD denominated.

Eg.
When an company/importer here import an Iphone, the importer here needs to pay the supplier in USD.
Where the importer can get USD?
From BNM.
That's why BNM must have enough USD in the coffer when the importer come to the bank with RM and want to exchange to USD.

While for the like US, they do not need much foreign currency reserves, as all major export import are traded in USD, and they have the ability to print their own USD. So don't need other currency reserves?
Not enough USD?
Print it.

Internationally, mostly view foreign currency reserves that able to pay at least 3 months plus import is considered a "healthy" level.

It is best interest for BNM not to intervene too much, especially in this kind of sold down across Asian region currency due to Yuan depreciating.

Try to intervene to counter the market force, wasting the precious foreign currency reserves only.
Even Sgd also goes down against USD.

To be fair, BNM also cannot do nothing if speculators start to pile up against your currency.
Need to give "warning" to market, "don't play too far".

We do not know how much exactly was used to "defend" the RM at Rm3.80.

With capital flight from stock market and bond market, the foreign currency reserves surely will go down, as those capital when remit out, they will drain the the BNM foreign currency reserves.
Investors sell off share or bond, take RM in cash, go to bank to exchange to USD, then BNM needs to use the USD in foreign currency reserves to pay them.

This morning up and back to Rm4 level.

But reit may have difficult time ahead at least for near term due to US raising rate, and potential slowdown in property sector.
Also, Singapore property has been softening lately.

So for near term, reit outlook is not that good.

Longer term, yes may be.

Market goes wild...

4.12!

At $10 per barrel, oil is cheaper than mineral water already...

If oil price continue to go lower, it is a supply destruction factor already, which serves as cushion at the downside.

Back 2000 time, it happened once (at the region of USD20), which was supply destruction, which lead to not enough supply after 5-7 years later, which prompt oil price to shoot up as high as USD140 afterwards during 2006~2007 time.

Please do not spread unfounded rumour that intend to spread fear, this is irresponsible act.

Even when 1997 crisis which was far worst than what we are experiencing now, there is no limit on withdraw from bank.
Capital control only imposed on 1998 was targeting only on money outflow to overseas, never on account withdrawal.

It makes no sense to impose withdraw limit from bank account, as it has no relationship to RM dropping nor can stem the RM dropping in forex market.
RM drop in forex market is because money outflow, not money withdrawal from account nor ATM.

If want to contain the speculative outflow of RM, a capital control is enough to stop it.

You need to understand why Greece impose withdrawal, because Greece is short of Euro mainly because they cannot print Euro on their own.

A half understanding can be worst than no understanding at all.
Do not blindly believe with "half understanding".

It is as same as previously people spread rumour that USD was going to be worthless due to trillions of debt, which urge people to rush in gold.

A "half understanding" and believe it, may dump all the USD and invest in gold, now may be suffering 30% losses, and miss the opportunity to reap current USD strength.

No such thing.

Please read above post.
Ty.

Bank liquidity is ample.
There is no short of cash in banking system.
Klibor market tells the story about liquidity between banks.

When a country or bank imposed withdrawal limit, it is about liquidity problem, not about forex market.

If one needs to ask such a question in the first place, it just means one already "start or have some sort of degree believing such an unfounded rumour" in the first place, which further seconded by the statement of effect of "Greek fallout could hit Malaysian in the same way".

Any informed and knowledgable in financial issue will straight away treat such a rumour as nonsense when reading such an unfounded rumour, won't need to ask for further details.
There is no logic of the statement need to limit withdrawal of account, it won't help the level of RM at all.

If said about capital control or other measures to reduce speculative activities etc, ok, it makes more sense.
This is the difference.

I am not saying you are spreading the rumour, but it is worrysome to see one needs to ask such a question in the first place.
With such a word or statement made and may soon be spreaded across over the net by ill intention person.

In EU, they use single currency, any monetory issues are controlled by ECB.
Individual country cannot simply print Euro nor imposing interest rate, all under purview of ECB.

Not allowed and cannot print the Euro, what is the difference?
Both also cannot print the money. Same.
They are seeking Euro money from IMF and ECB to pay their debt due.
If they don't play the rules of EU/ECB, they will be kicked out by Euro single currency and no longer can use Euro.

When a country is running at deficit situation, fiscal and trade deficit, it just means they won't have enough money left without printing the new money.


At the moment, Petronas still earning oil money ten of billion RM, it is not the like oil money is totally running out.

Malaysia imposed peg and capital control with just with foreign currency reserves amounted of less than USD 20 Bil. and able to survive through and resulted foreign currency reserves being replenished aftewards and keep on climbing up since the control.
I do not see why Malaysia cannot impose peg and capital control with USD 90 bil level.

If you have trade surplus with current account surplus, capital control + peg at low level can work to certain extent.

But capital control is a measure least favourable and should be treated as last resort option in a desperate time.

In term of fundamental and economy data, the state of economy at the moment is far better than 1997.
Just Malaysia needs to sort out some mess in political front, which is one of the major factor that sending negative sentiment towards RM.

Generally, most debt are in RM denominated, as compared to 1997 whereby a lot of debt were USD denominated.

This is the big difference.
If currently debt composition is still as last time with high percentage of debt was USD denominated, then yes, it is a big problem already.
Many had learned the lesson of 1997 the danger of using foreign currency denominated borrowing.

So watch out those listed company share with high USD denominated debt one.
It may put a big dent on their financial report for the coming financial report if USD staying at elevated level.

Every sovereign country that has its own currency can print their own money, if not where the money comes from?
Just the more you print, the less value your money will be aka at the cost of inflation, which may haunt you back.

That's why central bank generally will refrain from printing money, unless necessary, as you don't create 'wealth" by printing more money.

This is a fact, not only theory.
When US underwent QE time, they create extra trillion of USD, that's why we saw USD exchange rate plummeting across the globe.
Same with Japan QE, ECB QE.

Eg.
if you print 10 bil, then there is potential 10 bil outflow aka there will be pressure of 10 bil of supply to buy USD or other foreign currency
if you print 100 bil, then there is potential 100 bil money that want to exchange to USD.

100 bil selling pressure more than 10 bil, hence price will go down.
Basic of supply demand that dictates the movement of pricing.

Yes, please do not blindly believe anything, when you think the limit of 3K withdrawal unfounded rumour, it totally has no logic at all, so easily busted.

The news about those money changers outside may be short of USD, is due to demand on physical note, not about liquidity.
Anyone still can exchange a few or hundred of million USD with banks easily.

The only reason why banks want to impose withdrawal limit is when they are short of liquidity.

Currently, liquidity between banks is ample, if banks are short of liquidity, you will see Klibor rate shooting to the roof particularly overnight rate and 3 months rate which serves as indicator what is the situation of liquidity in the financial market.

When there is a liquidity squeeze, you see interbank rate shoot to the roof like during 2008. (Libor rate for global banking interbank lending)

There is no doubt household debt and public debt are at elevated level, which needs to be sort out in the near future, or in other word need to trim down the fiscal deficit situation, if not, longer term future may be following Greece path.
But at the moment to near term, the situation is not as bad or doomed already.

At this current turbulence time, there is a need to be careful about rumour flying around.

We do not want any unfounded and illogical rumour that may send unnecessary fear to uninformed public out there, which could result someone loss their hard-earned money, as any financial decision made due to unfounded rumour may result in loss of money.