Valuing a currency

THERE is much comparison with the ringgit against the US dollar, and in reality that is really not fair.

Going by the size of the US economy, the status of the dollar as the world’s reserve currency and the preference for the dollar in times of uncertainty, there is an easy explanation why the US dollar is strong.

Even with the dollar’s strength, one has to look at the ringgit’s position against a bunch of other currencies that have performed worse against the dollar.

In short, the ringgit has done well against a basket of currencies apart from the dollar and the ringgit on a nominal effective exchange rate basis is undervalued.

But when comparing against the Singapore dollar, well, the same argument can be had where the Singapore economy has a better credit rating and its wealth far surpasses its debt.

But the shame of it all for the ringgit in comparing with the Singapore dollar is that both countries have people who share the same ethnicity and cultures.

We celebrate the same major religious festivals, speak the same languages and share the same type of food, albeit it tastes better here than in the republic.

But to see one Singapore dollar buying RM3.24 today when it started off at 1:1, one cannot help to wonder what went wrong. And that is despite Malaysia having the better luck when it comes to natural resources.

A reversal of the decline can surely start by having a commitment to correct the wrongs in the country, to put in place the universal accepted standards of governance and have the right policies that will steer the country in the proper direction.