Ringgit's Performance: Mixed Fortune

While the exodus by the hedge fund managers since May, spooked by the US Federal Reserve tapering talks, the US dollar has pulled the rug from under most Asian currencies.
At 3.224 to the US dollar last Friday, 29th November 2013, the ringgit was down 6% from its peak in May, or 2.9% since the start of the year.

Other regional currencies were hit harder. A quick check on the foreign exchange rates revealed that holiday makers can get better value for the ringgit if they are going for a vacation Down Under, as the Australian dollar had fallen 7.7% against the  ringgit since January.

For a bargain vacation closer to home, a shopping trip to Bandung, Indonesia offers the best value following the12.9% slump in the rupiah against the ringgit this year. India, too, is an interesting travel destination given the sharp decline in the rupee.
According to the forex research team at Maybank Singapore, the key risk for the ringgit and other Asian currencies next year, is the anticipated reduction of the US Federal Reserve bond-buying programme. This could happen in the first quarter of 2014.
The forex team at Maybank expects the ringgit to fall to a low of 3.27 against the US dollar early next
year, but sees the currency climbing to 3.12 by the end of the year.
“Barring no policy slippages and little deterioration, we are bullish on the currency for next year,” head of  forex research at Maybank in Singapore Saktiandi Supaat said in his note to clients. The volatility in the currency market in 2014 would continue to be driven by the developed markets. 
The bank continues to be bearish on the rupiah, given the twin deficit concerns and the upcoming parliamentary and presidential elections in Indonesia in 2014. The rupiah last week fell below the 12,000-level against the US dollar for the first time since March 2009. Supaat and his team believed there could be downside risk for the rupiah in the short-term, but expected the currency to recover to 11,900 by the end of next year.
Supaat and his team also expected the Australian dollar to remain weak, at least in the early part of
2014, with the Reserve Bank of Australia sending out clear messages in recent months that it preferred the Australian dollar to remain soft.
Source: theSTAR 02-12-2013

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