Summary
This Policy Brief presents the findings of a study on the relationship between the US interest rates and the value of the Ringgit in the foreign exchange market, evaluating the determinants of the Ringgit’s movements.
The analysis reveals that US interest rates empirically do not influence the movement of the Ringgit in the international market. When factoring the inflation into the analysis, the US interest rate only influences the Brunei Dollar and the Vietnamese Dong, not Malaysia.
The analysis further indicates that the overall economic competitiveness, including macroeconomic structure, labor market, export competitiveness, and sectoral diversity, influences the position of the Ringgit.
This Policy Brief suggests that authorities should focus on building an Economic Correction Model by strengthening the economic structure and competitiveness to ensure the stability of the Ringgit in the future. Therefore, arguments linking the position of the Ringgit to US interest rates should be more cautious in economic discussions.
