Monday, September 1, 2008

Malaysian Budget 2009 - Ringgit Now Under Pressure

The much larger than expected fiscal deficit at 4.8% has great potential to build up pressure on our currency-ringgit.

With the expected higher borrowing needs by the Federal Government and the unexpected inflation as a result of higher spending, in short to medium term, ringgit may turn soft against greenback.

The likely bearish outlook for our currency may not be good for fixed income holdings of foreign residents. As such, the foreign funds may be diverted from Malaysia. Inevitably, they could put more pressure on ringgit.

But what has a weaker ringgit got to do with the folks?

With the U.S. dollar projected on the likely uptrend and ringgit under bashing, it spells bad for our cost of living. A falling ringgit has the effect of jacking up our inflation, making our livelihood even harder.

It is almost for sure that the worsened fiscal posirion is going to constrain our currency.

Let's stay tuned in to ringgit's trend!

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