If Malaysia can play its cards right, we may have a chance to recover within the next year if the government adopts similar strategies.

Malaysian citizens and residents who are travelling to Singapore are now facing quite a hike in exchange rates between the Singapore Dollar and the Ringgit.

The Singapore Dollar hit an all-time high exchange rate against the Ringgit on May 23, with one Dollar worth around 3.1964 Malaysian Ringgit early in the day (6.48 a.m.), before closing out at 3.1950.

Speaking on it to Channel News Asia, a financial expert pointed out that the spike wasn’t caused by a single factor alone.

“The SGD-MYR hit a record high of 3.1964 this morning largely due to strength in the Singapore Dollar, as preferred by MAS (Monetary Authority of Singapore) officials,” said Simon Harvey from MonFX.

“There wasn’t one individual headline-catching event, but instead it was the technicalities of Singapore’s monetary policy that created this all-time high.”

Another likely reason for the strengthening of the Singapore Dollar points to news that U.S. President Joe Biden is possibly planning on slashing tariffs on products from China, resulting in the value of the Yuan rising tremendously.

This rising appreciation of the Yuan has also managed to pull up the value of the Singapore Dollar, mainly due to the fact that the Yuan holds the largest share in Singapore’s Dollar Nominal Effective Exchange Rate (S$NEER) – the exchange rate between the S$ and a selection of currencies from Singapore’s major trading partners.

“The rally in the Yuan dragged the Singapore Dollar higher too, as currency traders looked to offset the depreciation in the Sing Dollar relative to the Yuan with other currencies,” Harvey said.

Naturally, this strengthened the Singapore Dollar against several of the country’s trading partners and their currencies such as the U.S, Malaysia, Japan, and Hong Kong.

SINGAPORE TIGHTENS MONETARY POLICIES TO PROMOTE GROWTH

This isn’t really surprising seeing that Singapore has long adopted rather aggressive monetary policies which have helped appreciate the Dollar and push it to higher levels. Compared to the neutral Malaysian strategy of combating inflation by keeping interest rates stable, Singapore has in fact tightened its policy at least three times over the past six months.

A currency strategist from the Bank of Singapore also told CNA that this difference in policies has so far benefited Singapore, and will continue to do so in the short term. If Malaysia can play its cards right, we may have a chance to see some meaningful gains within the next year.