
Is the Ringgit currently undervalued?
The latest statement from the Governor of Bank Negara on the value of the Malaysian ringgit is a hot topic, sparking discussions about the undervaluation of our national currency. According to him, the appropriate value for the ringgit is around 4 ringgit 30 sen against the US dollar, and Malaysia’s economic condition shows good health.
However, why is the value of the ringgit still considered low? One of the factors is due to Malaysian exporters holding US dollars, causing the ringgit to remain undervalued. When exporters keep their export earnings in US dollars and the value of the US dollar continues to rise, they benefit from the exchange rate difference.

In 2016, Bank Negara Malaysia took steps to balance the value of the ringgit by ordering exporters to convert their export earnings from US dollars to ringgit. However, since the liberalization of foreign exchange regulations in 2021, exporters are now free to hold foreign currencies without being forced to convert them to ringgit.
In a recent statement, the Governor of Bank Negara stated that they are in discussions with government-related companies, such as Government Link Investment Companies (Glicks) and Government Link Companies (GLCs), to discuss measures to enhance the value of the ringgit. Although Bank Negara can no longer control private companies, Glicks and GLCs can still be controlled mediums to help strengthen the value of the ringgit.

This strategy involves bringing investments made by Glicks and GLCs abroad back to Malaysia. While this can help strengthen the value of the ringgit, it should be noted that this action also carries certain risks, especially related to exchange rate changes.
In efforts to enhance the value of the ringgit, Bank Negara needs to consider market conditions and conduct in-depth studies to ensure that the measures taken provide long-term benefits to the Malaysian economy.