intro – myr: malaysian ringgit
MYR i.e. Malaysian Ringgit is the currency of Malaysia. MYR is issued by the central bank of Malaysia – Bank Negara Malaysia. The word ringgit meant “jagged” in old Malay. It was used to refer to saw-like edges of silver Spanish dollars. Spanish silver dollar coins was a widely circulated currency in South East Asia during Portuguese colonial era. The Malay name Ringgit was officially adopted in 1975. The earlier name for MYR was Malaysian dollar.
Although MYR is now a managed free float currency, offshore trading is prohibited. MYR experienced very high volatility during the 1998 Asian financial crisis. Hence, Bank Negara Malaysia pegged the MYR to USD at the rate 3.80 MYR to 1 USD. The investors started pulling money out of Malaysia and this led to large MYR capital outflow. In response to this, Bank Negara Malaysia, then banned offshore MYR trading.
The value of the MYR is sensitive to investments in emerging markets funds, country’s infrastructure development fund and related projects. In addition, MYR has some correlation to commodity prices as Malaysia is a net exporter of oil and gas.
Offshore banks that want to trade in MYR are required to have onshore presence in Malaysia. Despite of not being a legal tender, MYR is generally accepted in Philippines, Thailand, Indonesia and Vietnam.
MYR origins
European colonial powers began taking control of Malay Archipelago between 16th and 19th centuries. Portuguese established trading ports in the region from1509. Dutch soon followed in the 17th century. At this time, silver Spanish dollar coins were used throughout Southeast Asian trading routes, the China coast and Japan. East India Company minted Indian Rupee in British India and introduced it in Malaysia in 1837.
Then, Malaysian archipelago used Indian Rupee for 30 odd years, followed again by Spanish silver dollars. By the late 19th Century British government took direct control of East India Company’s colonial territories. Hence, in 1903, Malaysia changed its currency to the Straits Dollar.
The Straits Dollar was pegged at two shillings to the British Pound. Malaya and British Borneo gained independence in 1957. Board of Commissioners of Currency, Malaya and British Borneo introduced Malaya and British Borneo dollar. Malaysia used it after its formation in 1963 and Singapore after its independence in 1965. After 1967, Malaysia, Singapore and Brunei ended the common currency arrangement and began issuing their own currencies.
MYR in late 20th century
In 1967, the new central bank, Bank Negara Malaysia started issuing Malaysian Dollar. It replaced Malaya and British Borneo dollar at par and was pegged to Pound Sterling at 8.57 MYD per 1 GBP. Malaysian govt. decided to maintain the currency union with Singapore and Brunei. Hence, Malaysian dollar was exchangeable at par with the Singapore dollar and Brunei dollar until 1973.
In 1973, Malaysia withdrew from the currency union. The Malay name Ringgit was officially adopted in 1975.
Between 1995 and 1997, Malaysian Ringgit was trading as a free float currency at around 2.50 MYR to 1.0 USD. During the Asian Financial Crisis in 1997, there was a large capital outflow. This was in the form of high denomination MYR 500 and MYR 1000 notes. As a result, the Malaysian govt. introduced demonetisation of MYR 500 and MYR 1000 notes in 1999.
Next, to avoid fluctuation of value of MYR, the Central bank followed the “dirty float” principle. Then, In 1998, the Malaysian Ringgit was pegged to the US dollar at 3.8010 MYR per 1.0 USD.
MYR in 21st century
MYR had lost 50% of its value against the USD between 1997 and 1999. Then, it depreciated against other currencies between December 2001 and January 2005. In 2005, Malaysia ended the MYR peg to USD. Malaysia allows MYR to operate in a managed float against several major currencies. Bank Negara actively participates in foreign exchange markets to maintain stability of the currency’s value. At the time of writing this article in 2020, MYR has remained non-tradeable outside Malaysia since 1998.
final comments
It is important to spend some time learning the history and basics. This time spent will yield dividends when you are trying to predict movement of an asset. Also remember that you are more rational before you place a trade. So, it’s important to set some rules. If you like market conditions and they fit what your rules suggest, go for it. If the conditions for the rules don’t fit what you see in the markets, don’t trade for it’s own sake. You don’t have to trade every day. The point of having rules is to run them to your favour, and not let them run you.
Day trading follows the same rules we use for life. Successful trading is the art of using knowledge and skills at the right time. It is also essential to set some limits once you open a position. For example, you may impose a limit on yourself to not keep a trade open for more than 20 days. Finally get access to good tools that can help you achieve your trading goals. It’s best to try out a lot of things on paper money accounts before risking your capital.
Despite of all the rules, limits and right mindset, random events will happen. So always have a contingency plan. A perfect system or rules don’t exist. And, this is a good thing. Otherwise, someone will work it out and own half of the free world. All algorithms, tools, systems and rules are based on a snapshot of data. So always pay attention to news and data on a given day.
how to apply this to trading
STOKAI provides daily fx prediction using algorithms based on all factors that impact the price of given currency pair. Then, it evolves this over 10 days in the future. Tutorial and brief user guide is available here – Tutorial. If you have any questions, please contact us.
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