Weaker ringgit not always bad news

Time for change: Currency trader Raja Nasirudeen Bukhari counting ringgit and US dollars at his store in Kuala Lumpur.

PETALING JAYA: Malaysians are paying more for imported foods and goods due to the stronger US dollar. However, Malaysian economists say it’s not all gloom and doom.

Julia Goh said higher cost of imports, especially luxury goods, would be passed down to consumers.

“Sellers will raise prices of high-end products especially if they know customers can afford it and don’t mind paying,” said the CIMB Investment Bank director/regional economist.

But she pointed out that other sectors, like the electrical and electronic industry, were “very competitive” and the prices of these goods were unlikely to increase.

The value of the ringgit is trading at about 3.70 to the dollar, the lowest since capital controls were removed in July 21, 2005.

“We do anticipate further volatility for the ringgit this year,” said Goh.

One senior bank economist said higher cost of imports was offset partially by lower global commodity prices.

He said Malaysian exports were also cheaper and exporters were reaping the benefits of the weaker ringgit.

He added that parents who had or were thinking of sending their children oversees to study should be prepared for currency fluctuations.

“They pay more when the ringgit is weak and less when it’s strong. This is the reality which they must accept,” he said.

He expected the ringgit to slide to 3.80 to the dollar, the same rate at which Bank Negara had pegged the currency on Sept 2, 1998 (when the ringgit was trading close to five to the dollar).

“I don’t expect the ringgit to fall beyond 3.80,” he said.

He felt that the cost of studying abroad was not a major concern of any government.

“Those impacted (parents and students) are a small number. Policy makers are more concerned with how the weak ringgit affects ordinary Malaysians,” he said

The US Department of Commerce reported that Malaysian students in colleges and universities there (US) contributed RM805mil (USD218mil) to the US economy last year.

He said the slide of the ringgit was due to the lower crude prices, along with investment sentiment, which was being influenced by the political climate here.

He said there should be a correction this year and expected the ringgit to trade at 3.65 to the dollar on average for the year.