The Malaysian currency fell to a new low in 25 years, becoming the worst performing currency in Asia this year, after the Japanese yen

October 19: As the US dollar rose and the interest rate gap with the US widened, the Malaysian currency fell to its lowest level since the Asian financial crisis.

The currency's exchange rate against the US dollar fell 0.3% to MYR 4.7635 per US dollar, the lowest level since 1998. In Asia, after the yen, it became the worst performing currency this year.

This latest round of decline occurred as the dollar rose due to safe-haven demand triggered by the Israel-Hamas conflict. Southeast Asian countries also experienced a six-month decline in exports in August, partly due to a slowdown in growth in China, their biggest trading partner. Export data for September will be released at noon local time on Thursday.

The Malaysian National Bank has decided to suspend interest rate hikes since July, which has also had an adverse effect on the currency, as central banks around the world have shown hawkishness. This leaves a gap between the local overnight policy interest rate and the record level of the Fed's fund interest rate cap.

The Malaysian currency's poor performance is due to “the real interest rate gap likely to become more unfavorable, particularly as the removal of subsidies affects inflation and reveals softer actual policy interest rates,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank Singapore Limited. He also added that policymakers are facing a trade-off between the resistance of high interest rates to the economy and inaction that jeopardizes the macroeconomic economy and the stability of the Malaysian currency.

If you think about it on the positive side, what are the benefits of the depreciation of the Malaysian currency? 🥲