Ringgit depreciation unexplained, says expert

Datuk Dr Mohamed Ariff, an economics professor from International Centre for Education in Islamic Finance (INCIEF), is baffled why the ringgit is depreciating. – The Malaysian Insider pic, May 14, 2015.

The depreciation of the ringgit, which made it the worst performing currency in Asia last year, is "unexplained" and could not be caused by plummeting oil prices, an economics professor said today.

"Malaysia is now a net importer of oil. We import more oil than we export. So dropping oil prices should have been good for our economy," said Datuk Dr Mohamed Ariff, an economics professor from International Centre for Education in Islamic Finance (Incief).

He was speaking during the launch of the launch of the United Nations Economic and Social Commission for Asia Pacific (Unescap) economic and social survey of the region for 2015.

"The ringgit's plummeting value is something that is unexplained. I think the ringgit is being undervalued. The Thai baht is still performing stronger than the ringgit despite the political situation in the country," Dr Ariff said.

Dr Ariff said that while oil prices can be bad news for the government, it can only be good news for the economy.

"For the economy, the costs would have gone cheaper that made would have made the domestic economy much more competitive," he said.

"It's bad news for the government because it relies very heavily on the oil revenue," he added.

These, however, does not explain the performance of the ringgit compared to other currencies in the region.

"The only reason I can think of is capital outflow," he said, while ruling out market speculation as a factor.

"Currency speculation activities does not target one particular currency alone," he said.

- TMI