Ringgit has been staying around 4.48 to a US dollar for quite some time. Today, it finally breaches 4.49 and was trading as low as 4.4965 to a dollar. What does this tell you? It means the 4.50 resistance level is cracking and once this level is broken, the 4.50 will become the new support level while a new resistance level will be formed – 4.80 to a dollar.
This also means since Donald Trump’s stunning victory after the 2016 U.S. Presidential Election on Nov 8, 2016, the Malaysian Ringgit has depreciated about 6.9% against the US dollar. In comparison, the Singapore dollar, Indonesia Rupiah and Thai Baht have depreciated by 4.6%, 3.1% and 2.8% respectively against the US dollar.
No matter how you look at it, Malaysian Ringgit is toast. Only CIMB Chairman Nazir Razak, brother of Prime Minister Najib Razak, thinks the Malaysian Ringgit should be trading at 3.70 per US dollar. The rest of the government officials can do nothing but scream that the economic fundamentals remain strong.
Foreign speculators and punters stunned by weakening ringgit but trapped with losses on their long positions on the currency blame “overselling” but could not offer logical explanation simply because they hadn’t a clue about Najib Razak’s corruption and scandals. But for those who understood Najib administration, they knew how to place their bets.
In December, 2016, Mizuho Bank predicted the dollar-ringgit to hover at 4.30-4.70 within January to March, 2017. For the same first quarter of January-March, Robert Rennie, a global head of market strategy at Westpac, is now betting the Malaysian Ringgit could weaken to 4.55 by the end of March 2017.
Now that the ringgit has weakened to below 4.49, essentially it has fallen to even lower than 4.4770 recorded last month, which was then the lowest since the 1997-1998 Asian Financial Crisis. When that happened last month, Malaysia’s central bank – Bank Negara Malaysia – had moved to clamp down on non-deliverable forward trades, causing more outflows.
Initially, Najib administration could blame Trump’s unexpected win for the bottoming of ringgit. But since then, the crude oil prices have been appreciating from US$46 a barrel on November 8, 2016 to the present US$58 a barrel. The Federal Reserve had also hiked the interest rate by 25 basis point, as expected. What else can Najib son of Razak blame?
Will Najib administration blame China for a slower economic growth, which is an open secret? Under pressure to call for a snap election this year, Mr. Najib does not want the voters to understand the risk that the country is facing – shrinking current account surplus – which would make the ringgit more vulnerable this year, as proven today when the ringgit plunged below 4.49.
As much as Najib wishes to hide or divert the attention, one domestic factor stubbornly haunts the weak ringgit – 1MDB scandal. This is the only factor that is causing the ringgit to be the worst performer in Southeast Asia. Until the corrupt prime minister wins fabulously in the coming 14th general election, very few foreigners in their right mind would buy the ringgit.
The year 2017 will be the third season the explosive 1MDB scandal continues tainting the good name of Malaysia, and preventing the ringgit from making any sustainable recovery. After the Swiss Attorney General Michael Lauber revealed 1MDB was actually a “Ponzi Scheme” designed to conceal misappropriations of US$800 million, Najib administration had stopped cooperating with the Swiss.
However, investigations and court cases are continuing globally – Singapore, Switzerland, Australia, Hong Kong, U.S., UK, Luxembourg, British Virgin Islands and Abu Dhabi – into allegations that diverted funds flowed to Najib Razak’s personal bank account and to his stepson, Riza Aziz, whose company, Red Granite Pictures, produced the film “The Wolf of Wall Street.”
Najib had initially hoped for a Clinton presidency to drop lawsuits filed by U.S. Attorney General Loretta E. Lynch and the U.S. Justice Department announced on July 20, 2016. The lawsuits were to seize assets that it said were the result of US$3.5 billion that was misappropriated from 1MDB (1Malaysia Development Bhd), a fund set up by Najib Razak himself in 2009.
With Trump’s unexpected win, however, Najib Razak could be secretly reaching out to former Goldman Sachs’ top guns who had benefited from 1MDB bond sales, especially President and COO Gary Cohn. Mr. Cohn has become very powerful after his appointment as Director of the National Economic Council, a position Trump simply calls his “top economic adviser”.
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