Malaysian consumers will be the prime beneficiaries of a strengthening ringgit, standing to gain from lowered imported inflation to increased affordability of goods and services reflective of the capital inflows into the capital markets.
CIMB Investment head of interest rates and foreign exchange strategy Suresh Kumar Ramanathan told StarBiz that a stronger ringgit would shield the country from imported inflation and helped increase affordability of some goods and services.
“Consumers will stand to benefit from a stronger currency in terms of cheaper cost of imported goods and this will be reflected in terms of better lifestyle and extra disposable income for the people. Importers will gain because there will be more demand for imported products,” he said.
“In countries such as Singapore and Switzerland, a stronger currency is synonymous with better and more affluent lifestyle with increased purchasing power. Consumers in these countries also benefit because companies tend to pass down these currency gains to their customers and this will eventually be the case in Malaysia,” Suresh added.
He said the strong currency will lead to increase in demand for products and services as they are cheaper.
“Companies usually say that they will face foreign exchange risks as an excuse for not passing on these gains but they can hedge it and purchase raw materials from the futures market instead of the spot market. These can be dealt with appropriate risk management strategies in place,” he said.
He added that exporters may experience some short-term drawbacks but they can choose to offset these by also hedging these risks.
A fund analyst with a foreign research arm said that a strong currency was needed to hedge against an eventual weakening of currencies in the West. This could benefit companies such as Tenaga Nasional Bhd which had foreign currency denominated debts, the analyst said.
Asia, which today has become the growth engine of the world, will benefit from a rise in their currencies as the continent will drive global growth as economies in the eurozone, US and Japan falters.
Suresh said the ringgit had strengthened and was poised to strengthen to RM2.50 per US dollar in the longer term which was the consensus estimates today.