Volume 3 Issue 29: Two-Cent Economics

Rubbish Analysis on the Ringgit

According to this Bloomberg article, the Ringgit is weakening due to concerns over the Euro debt crisis. Here is an excerpt from one of CIMB's currency strategist, no less:

“Risk-appetite is on the low side as debt issues in Europe are still plaguing Asian currencies,” said Suresh Kumar Ramanathan, a currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. “Malaysia’s inflation data may not have much impact.”

I don't know how he makes up these reasons but let us have a look at the Ringgit's performance against the USD and EUR:

USDMYR

EURMYR

Over the past year or so, the Ringgit has been appreciating strongly. The Euro debt crisis has been around since early 2010, and if you look at the EURMYR, the Ringgit appreciated very strongly against the EUR in the first half of 2010, which actually suggests that the worry was much worse at that point in time. So, this mambo jumbo over the Ringgit's depreciation is pure hogwash.

Could the reason be as simple as "the Ringgit is overvalued"? It is high time that the Ringgit corrected itself. With the slew of unimpressive economic data of late, there is absolutely no surprise that the demand for the Ringgit should subside. GDP growth in 2Q 2011 will quite likely be unimpressive too.

I guess my point is, sometimes, we can't just take the "advice" of analysts at face value. Besides, what does the Euro debt crisis have to do with the Ringgit vs the USD? Try to apply some skepticism in reading some of these analysis. Try to ask, "Does this actually make sense?". It will do you a lot of good in helping you to keep your money safe.