Why has the ringgit depreciated nearly 10 per cent against the US dollar this year?

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The Ringgit's Depreciation Against the US Dollar

The Malaysian ringgit has weakened by almost 10 per cent against the US dollar this year, a decline attributed by some to the perceived failures of economic management and inflation control. As of the end of 2021, the exchange rate stood at RM4.17, but it had fallen to RM4.58 by September 24 of the following year. This depreciation has also been observed against other major currencies, including a historic low against the Singapore dollar at RM3.26 and a notable weakening against the Indonesian rupiah.
Concerns Over Economic Management

Critics have pointed to the performance of key economic figures as a factor contributing to the ringgit's slide. Specifically, DAP chairman Lim Guan Eng has called for the replacement of Minister in the Prime Minister’s Department for Economic Affairs Datuk Seri Mustapa Mohamed and Special Cabinet Task Force on Jihad Against Inflation chairman Tan Sri Annuar Musa. Lim cited their inability to curb inflation, which reached a 16-month high of 4.7 per cent as of August, from 4.4 per cent in July, as evidence of their shortcomings.
Impact on Interest Rates and Borrowing Costs

The perceived failure to control inflation has also been linked to decisions by Bank Negara Malaysia to increase the Overnight Policy Rate (OPR). The OPR was raised to 2.5 per cent, and further increases were anticipated, potentially reaching 3 per cent by early next year. This monetary tightening is expected to impose higher interest costs on both Malaysian individuals and businesses, increasing their financial burdens.
Broader Currency Weakness and Import Costs

The depreciation is not solely against the US dollar, but also against other significant trading partners' currencies. The ringgit's dip to RM3.26 against the Singapore dollar and its appreciation against the Indonesian rupiah highlight a broader trend of weakening. This trend results in increased costs for imported goods and services, and also affects the cost of repaying US dollar-denominated loans, such as those related to 1MDB.

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Why has the ringgit depreciated nearly 10 per cent against the US dollar this year?

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