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Trump’s monetary policies may hurt ringgit

 | November 10, 2016

Veteran journalist speculates President-elect Donald Trump will use higher interest rates to boost the US economy, causing havoc on currencies in developing nations.

kadir-trump

PETALING JAYA: Veteran journalist A Kadir Jasin wrote in his blog today of the likelihood that President-elect Donald Trump will use monetary policy as a key element of his economic management over the next four years.

“If Trump takes that route, we may see interest rates and inflation rising.

“Higher interest rates will push the US dollar up, draw more savings and investment to the US and make imports cheaper, thus causing havoc to the currencies of the developing economies.

“If that happens, we can expect to see the ringgit get bombed once again,” Kadir said, referring to the local currency which hit its lowest levels this year since the late 1990s.

He said a stronger US dollar would hit Malaysia harder compared with other emerging economies because the ringgit had suffered the biggest decline against the greenback.

Taking a swipe at reports that Prime Minister Najib Razak was said to be “Trump’s favourite PM”, Kadir said even such a status would not save the country from being badly affected by Trump’s economic policies and his Islamophobia.

The former New Straits Times group editor-in-chief quoted a New York Times analysis by Neil Irwin that the bond market was, as a rule, a more reliable guide to what global investors believed the future would look like than the erratic stock market.

Irwin had written: “And on Wednesday, bond markets sent one signal loud and clear: The Trump years are likely to feature higher inflation and higher interest rates than have prevailed in recent years.

“The interest rate on 10-year Treasuries soared to the highest level since January, rising 0.22 percentage points to 2.07 per cent. And much of the rise was attributable to investors’ belief that inflation will be higher than had seemed to be the case before the election surprise.”

 


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