Malaysian Ringgit - History

History

On June 12, 1967, the Malaysian dollar, issued by the new central bank, Bank Negara Malaysia, replaced the Malaya and British Borneo dollar at par. The new currency retained all denominations of its predecessor except the $10,000 denomination, and also brought over the colour schemes of the old dollar. Over the course of the following decades, minor changes were made on the notes and coins issued, from the introduction of the M$1 coin in 1967, to the demonetisation of M$500 and M$1000 notes during the 1990s.

The use of the dollar sign "$" (or "M$") was not replaced by "RM" (Ringgit Malaysia) until around 1993, though internationally "MYR" (MY being the country code for Malaysia) is more widely used.

As the Malaysian dollar replaced the Malaya and British Borneo dollar at par, the new dollar was originally valued at 8.57 dollars per 1 British pound sterling. In November 1967, five months of the introduction of the dollar, the pound was devalued by 14.3%. The new currency was not affected but earlier notes of the Malaya and British Borneo dollar were still pegged to pound at 8.57 dollars per 1 pound and, consequently, these notes were reduced in value to 85 cents per dollar.

Despite the emergence of new currencies in Malaysia, Singapore and Brunei, the Interchangeability Agreement which the three countries continued to adhere to as they were originally parts of a currency union meant the Malaysian dollar was also exchangeable at par with the Singapore dollar and Brunei dollar until May 8, 1973, when the Malaysian government pulled out of the agreement. The Monetary Authority of Singapore and the Brunei Currency and Monetary Board still maintain the interchangeability of their two currencies, as of 2009.

Between 1995 and 1997, the ringgit was trading as a free float currency at around 2.50 to the U.S. dollar, before dipping to under 3.80 to the dollar by the end of 1997, following the year's East Asian financial crisis. For the first half of 1998, the currency fluctuated between 3.80 and 4.40 to the dollar, before Bank Negara Malaysia pegged the ringgit to the US dollar in September 1998, maintaining its 3.80 to the dollar value for almost seven years, while remaining floated against other currencies.

The ringgit lost 50% of its value against the US dollar between 1997 and 1998, and suffered general depreciation against other currencies between December 2001 and January 2005. As of September 4, 2008, the ringgit has yet to regain its value circa 2001 against the Singapore dollar (SGD) (2.07 to 2.40 to the MYR),) the Euro (EUR) (3.40 to 4.97 to the MYR), the Australian dollar (AUD) (1.98 to 2.80 to the MYR), and the British pound (GBP) (5.42 to 6.10 to the MYR).

On July 21, 2005, Bank Negara announced the end of the peg to the US dollar immediately after China's announcement of the end of the renminbi peg to the U.S. dollar. According to Bank Negara, Malaysia allows the ringgit to operate in a managed float against several major currencies. This has resulted in the value of the ringgit rising closer to its perceived market value, although Bank Negara has intervened in financial markets to maintain stability in the trading level of the ringgit.

Following the end of the currency peg, the ringgit appreciated to as low as 3.16 to the U.S. dollar in April 2008. The ringgit had also enjoyed a period of appreciation against the Hong Kong dollar (HKD) (from 0.49 to 0.44 to the MYR) and the renminbi (CNY) (0.46 to 0.45 to the MYR) as recently as May 2008.

Political uncertainty following the country's 2008 general election and the 2008 Permatang Pauh by-election, falling oil prices, and the lack of intervention by Bank Negara to increase already low interest rates (which remained at 3.5% since April 2006) led to a slight fall of the ringgit's value against the US dollar between May and July 2008, followed by a sharper drop between August and September of the same year. As a result, the US dollar appreciated significantly to close at 3.43 to the MYR as of September 4, 2008, while other major currencies, including the renminbi and Hong Kong dollar, follow suit. The drop brings the ringgit to its weakest since September 24, 2007, and ranks it as the second worst performing Southeast Asian currency between June 2008 and September 2008. As of 5 August 2012, Malaysia Ringgit stands at USD 1 = MYR 3.1730.