![]() “Imports of intermediate and capital goods will be more expensive, raising production costs while slowing down capital investment and industrial upgrading,” Prof Yeah said. Malaysia’s weakened currency would result in higher import prices, burdening both consumers and importers, the experts said. WHAT DOES IT MEAN FOR MALAYSIA’S ECONOMY? He added that a weakening Chinese yuan against the US dollar had also indirectly affected the ringgit, given Malaysia’s strong trade linkages to China. “Investors would favour the US dollar when the interest rates are hiked for higher yields,” Mr Hafidzi explained. Higher interest rates would reduce the amount of money in circulation and decrease inflation, as loans become more expensive while deposits give better yields. Mr Hafidzi Razali, a senior analyst with strategic advisory firm Bower Group Asia, said the weakening of the ringgit to the US dollar was in part due to investors factoring in larger rate hikes by the US Federal Reserve, more so with inflation in the US reaching as high as 8.5 per cent recently. “As Malaysia’s interest rate adjustment is likely to be more gradual than international rates, the narrowing interest rate differential will be reflected in a weakening ringgit,” Prof Yeah explained to CNA. “Singapore’s monetary authority is expected to appreciate its currency to counter the rise in imported inflation. ![]() Sunway University economics professor Yeah Kim Leng explained that the Singdollar had reached this new height as the country’s monetary policy was based on managing the exchange rate, and allowing interest rates to adjust freely with international rates.
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