Explained: Why the Singapore dollar is so strong against the ringgit

[superadmin]

PETALING JAYA: The Malaysian ringgit and the Singapore dollar were once at par and freely interchangeable, That ended in 1973. Since then, the value of the ringgit has sunk, reaching a new low in June of RM3.4384 to one Singapore dollar.

How did this come about? FMT looks into the different economic and fiscal strategies that contributed to the ever-widening gap between MYR and SGD.

How it began

In May 1973, the Malaysian government withdrew from a currency interchangeability agreement with Singapore and Brunei by which the currencies of the three countries were at par value and could be freely interchanged.

Malaysia’s decision to leave the agreement was influenced by international factors and domestic economic conditions, says economist Yeah Kim Leng of Sunway University.

A system of fixed exchange rates between major currencies broke down after the US left the gold standard in the 1970s.

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