What Is Fair?

The Malaysian Ringgit has fallen significantly against the greenback, and Barclays expects the ringgit to weaken to as much as 5.0 by year-end. Read More . Given the movements in other currencies of its major trading partners, what will be the current fair value range of the Ringgit?

What are some of Malaysia’s trading partners – Singapore / Thailand / Indonesia / Philippines / China / Japan. The historical movements in currencies of Malaysia and its key trading partners are summarised as follows (since 22 July 2005*):

Summary_Currencies.png

*22 July 2005 – the commencement date for a managed float scheme for the Ringgit Read More

Statistical View

The outcome of a multi regression testing between Ringgit against the other six currencies is summarised as follows:

AllCurr_Regression.png

The results show that both THB and PHP appear to have insignificant statistical relationship with the Ringgit.

Re-testing (by removing THB and PHP) and result is shown as follows:

finalregressionresults

finalregressiongraph

The re-testing shows the following:

  • Given the movements in other peer currencies, the Ringgit appears to be relatively undervalued (actual: RM4.46 vs predicted: RM4.13)
  • 95%-confidence interval of between RM3.88 – RM4.38

Kindly note that the above desktop analysis is only a simple high-level testing. Further comprehensive testing shall be required to refine the current fair value range of the Ringgit. We may see potential weakness in the Ringgit and other peer currencies due to impending rate hike by the US.

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Author: Ken Utau

Markets Observer + Food Lover

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