Malaysian ringgit on a high after budget announcement

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The Malaysian ringgit climbed the highest in four months on Monday, after closing at a record high last Friday, when the government announced a 2014 budget that has been widely received as fiscally responsible.

The Malaysian government’s move to tackle its troubling fiscal deficit and spur growth has sparked renewed interest in the country’s currency.

Analysts said efforts towards fiscal consolidation and a broadening of the tax base will help shore up the ringgit, after it hit a three-year low against the greenback earlier this year.

Budget 2014 looks to introduce a goods and services tax, as well as cutbacks on subsidies, leading to a higher inflation outlook and boosting the local currency. In addition to a US Fed policy that looks to stay accommodative until next year, many analysts feel that the Malaysian ringgit will be one of the top performers in Asia this year.

However, the sustainability of the ringgit’s ascent depends very much on external factors — in particular, when the US Fed Reserve finally decides to wind back its stimulus policy.

Kenneth Tan from Philip Futures said: “I’ll be looking to see that the ringgit will appreciate further against the US, until at least mid-2014. And thereafter, looking at it to slow down. Because we can expect that the US economy will actually start to recover mid-2014 to end-2014, and that’s when QE tapering will actually kick in.”

Ray Farris, managing director and head of Asia-Pacific for fixed income strategy at Credit Suisse, said: “Once we get to the stage where the Fed starts moving again, and the global interest rate structure starts to rise, then we could start to see some renewed pressure on the ringgit to weaken a little bit — not dramatically, it was never one of the real problem currencies of the region.

“But it could soften again in say the second quarter of next year, assuming the Fed gets underway again in January or in March.”

On Friday, the Malaysian government announced a bold budget package which included a higher-than-expected 6 per cent GST, the abolishment of subsidies on sugar, and property tax hikes to rein in home prices.

The ringgit gave up some of its gains on Monday to profit-taking, ending out the day up 0.7 per cent.

 

 

 

Source : Channel News Asia | October 29, 2013

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About thomasdinnocenzi

Thomas D'Innocenzi is a highly accomplished, results-focused senior international executive with extensive experience in global sourcing and market development worldwide to meet evolving business needs. Tom has proven ability in implementing and managing profitable global sourcing operations worldwide. Extensive experience in international market development operations to accommodate rapid growth. Skilled in building top-performing teams, benchmarking performance, and restricting organizations to improve efficiency, productivity, and profitability. Experienced transition leader and change agent. As principal of Nova Advisors, LLC I’ve assembled an exemplary team that brings with them the knowledge and experience gained from starting up a Global Sourcing program with multiple Fortune 500 companies as well as the largest supplier network throughout the Asia-Pacific region. We have experience and expertise in more than a thousand medical and pharmaceutical products in manufacturing and sourcing at the best value. The right product, the right price point and the right branding fueled these successes that resulted in double-digit growth for top line sales and bottom line net margins for our customers. What sets us apart: • Our reach includes a large network of suppliers & manufacturers spanning 13 countries in Asia-Pacific region • We understand the manufacturing process and the business of the supplier and the buyer • Our company culture is based on quality assurance and our process is based on local quality control Our commitment is to be your partner offering the best products and services at the lowest cost. Contact me to discuss how we can make the global marketplace work for you. thomas@novaadvisors.com In addition, I am open to discussing opportunities in global sourcing, international marketing & sales, logistics and medical/pharma in Thailand, Vietnam, Malaysia, Philippines & Japan. Aside from my work I enjoy piano, astronomy, physics, and assisting my daughters with their studies. SPECIALTIES: Global Sourcing, Supply Chain Management, Business Development, Marketing, Logistics, Global Networking, Market Development, Healthcare Solutions, Pharmaceuticals, Medical Devices, Technology, Asia, Southeast Asia, US and Canada
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