THE EXCHANGE RATE OF MALAYSIA

BY # SITI SARAH, MIMIE FAZLINA AND SITI NABILA

An exchange rate is the price for which the currency of a country can be exchange for another country’s currency. It can be also regarded as the value of one country’s currency in terms of another currency. An exchange rate can be either fixed or floating exchange rate. A fixed exchange rate is decided by the Central Bank in the country and floating exchange rate is decided by the mechanism of market demand and supply in the economics. There are a lot of factors that can impact the exchange rate in a country and they are inflation, interest rate, country’s current account or balance of payment in the country, government debt and speculation. These factors are the biggest tool in the exchange rate of a country. Any changes in the factors lead to changes in the currency rate too. In our topic, we talk about the issue of the exchange rate between Malaysia and Thailand. The significance appreciation and the depreciation of this two countries will explain on why it happen and how can it affect the Malaysian economy. Based on the data shown, we can assume that Ringgit Malaysia has depreciated against Thai Baht. Tun Dato’ Seri Dr. Mahathir Mohamad once said in his interview with Bloomberg that the Malaysian used to buy things in Southern Thailand using the Ringgit Malaysia, but today the Ringgit Malaysia is rejected as it has depreciated more than the depreciation of the Thai Baht. Based on the study made, Ringgit Malaysia starts to depreciate on the early of November 2016 and amazingly the declined happened at the day of Donald Trump’s victory election. Malaysian economy is close related with the U.S. economy so with the victory of Donald Trump, it triggered the currencies of Asia countries especially Malaysia. Exchange rate of a country is important as a benchmark of the prosperous of its country’s economic. For Malaysia, we use a floating system exchange rate. That is why we can see the withdrawal of investor from Malaysia’s bond market can affect the value of currency significantly.