Ringgit weakness against S’pore dollar due to inflation differentials Maybank IB

PETALING JAYA: The ringgit’s weakness against the Singapore dollar in 2023 was due to inflation differentials between the two countries, according to Maybank Investment Bank Bhd (Maybank IB).

Foreign exchange research head Saktiandi Supaat said inflation in SIngapore stayed elevated while it decelerated in Malaysia.

“Our view on the SGD-MYR, in my opinion, was shaped by inflation differentials. Malaysia’s inflation has continued to be softer whereas in Singapore, core inflation continues to be elevated and sticky,” he said during Maybank IB 2024 Market Outlook media recently.

He said this led to different monetary policy responses between the Monetary Authority of Singapore (MAS) and Bank Negara Malaysia (BNM) where MAS adopted a tighter rate to ensure the strength of the Singapore Dollar in order to mitigate inflation.

He predicted that MAS’s commitment to a strong Singapore dollar is likely to continue until possibly in the later part of this year as long as inflation in Singapore remains high.

“There could be a change in MAS’s approach in the later part of the year where MAS would start easing off a bit and that could help to further add on to the story of a SGD-ringgit falling off towards a 3.30 or slightly below 3.30 levels as well,” he said.