Dearer ringgit takes away cross-border price benefit

BANDAR SERI BEGAWAN (Borneo Bulletin/ANN) - The Brunei dollar is expected to trade lower against the ringgit which is gaining strength on the back of a solid growth in the Malaysian economy.

With foreign exchange market analysts forecasting a rosy outlook for the ringgit in the near term, the Brunei dollar is likely to see a reduction in value against the Malaysian counterpart which is expected to go against the interests of Bruneian importers and cross-border buyers of Malaysian goods and services.

The Malaysian ringgit was trading flat against the Singapore dollar at 2.99052 yesterday from 2.9975 at the close the previous day.

The Malaysian ringgit appreciated against the Singapore dollar and hit a 14-month high of 2.9962 last Tuesday, touching the highest level since October 2016.

The ringgit has not been able to break the psychological level of 3.0 versus the Singapore dollar since it opened at 2.9988 on October 27, 2016.

Brunei dollar is pegged to Singapore dollar.

The ringgit breached 3.96 against the US dollar at noon and prospects are bright for the currency to test the 3.95 level, any time soon, supported by the country’s bright prospects with the release of better-than-expected Industrial Production Index (IPI) data.

At 3.9690 against the US dollar, it gained 160 basis points, versus 3.9850 at the close yesterday. The last time the ringgit appreciated close to this level was in May 2016. "The ringgit’s continued strengthening is underpinned by further solid expansion in Malaysia’s external performance in November (last year)," research firm MIDF Amanah Investment Bank Bhd noted in a report recently.

In a note, Kenanga Research said the ringgit would remain on a strong footing and gradually appreciate against the US dollar and other major currencies, given the economy’s solid current account surplus, benign inflation outlook and prudent fiscal position. It also forecast the ringgit to average RM4 to the dollar, while reaching RM3.95 by the end of 2018.

Meanwhile, Oanda Corp head of trading for Asia Pacific Stephen Innes told Bernama that Malaysia’s strong export performance, on the back of buoyant global economic growth amid stronger crude oil prices, had fuelled the ringgit’s movements.

Last week, Malaysia International Trade and Industry Ministry announced that Malaysia’s exports had increased by 14.4 per cent to RM83.5 billion in November last year, the highest monthly export value ever recorded since March in the same year due to higher demand for manufactured goods.

According to an analyst, a strengthening ringgit will discourage Bruneians from crossing the border to Malaysia for buying goods and services as an appreciation in the value of the Malaysian currency will make their purchases less profitable.

If the trend continues, Malaysian border cities that were making a fortune on bargain-hunters from Brunei are likely to see a dip in inflow of customers from the Sultanate who used to "flash a powerful dollar to buy goods and services that were cheaper there," he said, adding that "a strong ringgit will dent their hopes for better deals for shopping and hotel stay".

When asked about the impact of ringgit appreciation on Brunei, a local banker who wished to remain anonymous said, "With the rise in Malaysian ringgit, the question is whether local companies that bring in goods from Malaysia would be willing to absorb the cost or pass it on to the customers here.

"And it would also be less attractive now for Bruneians to cross the border to do their shopping or for ‘durian hunting’ due to a strong ringgit," he added.

"The Bank Negara Malaysia is likely to increase policy rate in the first quarter of this year. It is for the first time since August 2016 that we see the ringgit dip below three against Singapore dollar and below four against US dollar. Malaysian export and import numbers are expected to be up and trade activities are poised to look healthy," the banker added.

The appreciation of the ringgit comes during an off-peak period. Bruneians in their thousands crossed the border last month during long school holiday when the ringgit was hovering around RM3.01-3.03 against one Brunei dollar.

Jamar, a frequent traveller to Malaysia, said that now a lot of Bruneians are crossing the border to Miri, Limbang, Lawas and Kota Kinabalu to buy durian and other fruits. One piece of durian costs as low as RM5 in the popular E-Mart market in Miri and about RM30 for five to six pieces. With the ringgit appreciating, he sees a rise in prices in Malaysian markets. An elderly citizen Hajah Zayah added, "At the popular New World Mart in Miri, with B$100 we could easily fill up three trolleys of groceries compared to one trolley full here. I don’t know for how long it will last."


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