An appreciating ringgit will not have as much of an impact on the exports front as long as it strengthens in tandem with other currencies in the region.
Malaysia's top five export destinations in February were Singapore, China, Japan, the European Union and the United States. These countries were also the top five destinations for exports last year.
Economists told StarBiz that a strengthening ringgit would not be a problem as long as the currency's movement was synchronised with the region where competitors include Thailand, Indonesia and the Philippines.
Malaysia's competitors in the electrical and electronics (E&E) industry, which made up nearly 40% of total exports last year, include South Korea and Taiwan.
To varying degrees, emerging Asia's currencies have appreciated against their major trade partners as growth risks faded and the loose monetary policies of the United States and the 17-member eurozone prompt investors to shift their focus to more robust markets.
Bank Islam Malaysia Bhd chief economist Azrul Azwar said the ringgit's rise should not post much problem for local exporters as long as the currency's rise was not out of sync with regional currencies.
In any case, economists have pointed out time and again that Bank Negara would continue to intervene in the currency markets to ensure that the ringgit's movement remained orderly and gradual.
“This has always been the case, Bank Negara will intervene so as to ensure that the ringgit's movement will not impact the manufacturing sector's exports-intensive industries,” Azrul said.
He added that part of the reason for the rise of currencies in emerging Asia was due to expectations of tighter monetary policy as inflation fuelled by higher crude oil and commodity prices hit these economies, where demand has been stronger compared to the developed economies.
Affin Investment Bank Bhd economist Alan Tan said there were indications that the Federal Open Market Committee (FOMC) would continue to keep US benchmark interest rates low and monetary policy loose.
Filepic: A money changer counts U.S. dollar bank notes and Malasyian ringgit notes for customers in Kuala Lumpur. Economists told StarBiz that a strengthening ringgit would not be a problem as long as the currency’s movement was synchronised with the region where competitors include Thailand, Indonesia and the Philippines.
“The FOMC members are signalling that the easy monetary policy will continue as jobs and housing remain weak while the first-quarter gross domestic product growth is likely to be softer than the previous quarter,” he said.
The FOMC would release its rate decision on Wednesday while the first-quarter figures would be released on Thursday.
Meanwhile, SMI Association of Malaysia national president Chua Tiam Wee, whose members expect the ringgit to strengthen further, said any rise in the ringgit would have some impact on exporters.
“As trade is mostly conducted in US dollars, exporters will still have to fulfill their orders and absorb the losses,” he said.
Chua added that exporters would just have to be more productive and find ways to mitigate the strengthening ringgit via hedging or source their raw material in a more cost-effective way.