Question

use the exchange rate, better with diagram to
explain What are the key factors that have influenced the movement of the ringgit against the US dollar since 2010?

Answer 1

So, here the equilibrium exchange rate will be determined by the force of “demand” and “supply” of exchange rate. Now, the “demand side” depends on “import of goods and services and capital outflow”. Similarly, the “supply side” depends on “export of goods and services and capital inflow”. Now, since 2010 “USA’s” export and capital inflow has increased significantly, => the supply of foreign exchange reserve has increased in USA, => the equilibrium exchange decreases, => USA dollar got appreciated compare to “Ringgit”. Consider the following fig.

So, here “D1” and “S1” are the demand and supply of exchange rate, => the initial exchange rate is “E1”. Now, as the “export” and “Capital inflow” increases, => the supply of foreign exchange increases to “S2”, => the new exchange rate is “E2 < E1”, => the appreciation of dollar compare to “Ringgit”.