Malaysian ringgit

Etymology

The word ringgit is an obsolete term for "jagged" in Malay and was originally used to refer to the serrated edges of silver Spanish dollars which circulated widely in the area during the 16th and 17th century Portuguese colonial era. In modern usage ringgit is used almost solely for the currency. Due to the common heritage of the three modern currencies, the Singapore dollar and the Brunei dollar are also called ringgit in Malay (currencies such as the US and Australian dollars are translated as dolar), although nowadays the Singapore dollar is more commonly called dolar in Malay. To differentiate between the three currencies, the Malaysian currency is referred to as Ringgit Malaysia, hence the official abbreviation and currency symbol RM. Internationally, the ISO 4217 currency code for Malaysian ringgit is MYR.

The Malay names ringgit and sen were officially adopted as the sole official names in August 1975. Previously they had been known officially as dollars and cents in English and ringgit and sen in Malay, and in some parts of the country this usage continues. In the northern states of Peninsular Malaysia, denominations of 10 sen are called kupang in Malay ("poat⁸" in Hokkien, "Jiao" 角 in Mandarin), e.g. 50 sen is 5 kupang ("5 poat⁸" in Hokkien, "wujiao" 五角 in Mandarin).

Early history (1967—1997)

On 12 June 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 discontinuation of RM500 and RM1,000 notes in 1996.

As the Malaysian dollar replaced the Malaya and British Borneo dollar at par and Malaysia was a participating member of the sterling area, the new dollar was originally valued at 8.57 dollars per 1 British pound sterling. In November 1967, five months after the introduction of the Malaysian dollar, the pound was devalued by 14.3%, leading to a collapse in confidence for the sterling area and its demise in 1972. The new currency was not affected but earlier notes of the Malaya and British Borneo dollar were still pegged at 8.57 dollars per 1 pound; 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 adhered to as original members of the currency union meant the Malaysian dollar was exchangeable at par with the Singapore dollar and Brunei dollar. This ended on 8 May 1973, when the Malaysian government withdrew from 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.

In 1993, the currency symbol "RM" (Ringgit Malaysia) was introduced to replace the use of the dollar sign "$" (or "M$").

East Asian financial crisis and US dollar currency peg (1997—2005)

Between 1995 and 1997, the ringgit was trading as a free float currency at around 2.50 to the US dollar, but following the onset of the 1997 East Asian financial crisis, the ringgit witnessed major dips to under 3.80 to the dollar by the end of 1997 as a result of capital flight. During the first half of 1998, the currency fluctuated between 3.80 and 4.40 to the dollar, before Bank Negara Malaysia moved to peg 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. In addition, the ringgit was designated non-tradeable outside of Malaysia in 1998 to stem the flow of money out of the country.

While the printing of RM500 and RM1,000 notes had ceased in 1996 in response to risks of money laundering and capital flight, the underestimated effects of the financial crisis prompted the central bank to completely discontinue the use of the notes in 1999 by demonitising remaining notes in circulation, thereby ceasing to be of legal tender and being only exchangeable directly at the central bank.At the time of this note's demonetization from circulation in 1999,the RM500 notes worth approx. US$130 and RM1,000 worth of US$260 (according to 1999 exchange rate : US$1 = RM3.80).Despite these measures, some 7.6% of RM500 notes and 0.6% of RM1,000 notes remain in circulation as of 30 January, 2011. During a 2011 parliamentary session, then Deputy Finance Minister Donald Lim Siang Chai asserted that a total of 150,599 and 26,018 pieces of RM500 and RM1,000 notes (RM75,299,500 worth of RM500 notes and RM26,018,000.00 worth of RM1,000 notes) have yet to be withdrawn through the central bank.

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 4 September 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 21 July 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 US 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. This task is made easier by the fact that the ringgit has been non-tradeable outside Malaysia since 1998, which coincided with its pegging to the US dollar, a restriction that was not removed when it was de-pegged in July 2005.

Post-US dollar currency peg performance (2005—present)

Following the end of the currency peg, the ringgit appreciated to as high as 3.16 to the US 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. The initial stability of the ringgit in the late-2000s had led to considerations to reintroduce the currency to foreign trading. In a CNBC interview in September 2010, Najib Tun Razak, the then Prime Minister and Finance Minister of Malaysia, was quoted in stating that the government was planning the reentry of the ringgit into off-shore trading if the move will help the economy, with the condition that rules and regulations were put in place to prevent abuses.

Political uncertainty following the country's 2008 general election and the 2008 Permatang Pauh by-election, falling oil prices in the late-2000s, and the lack of intervention by Bank Negara to increase already low interest rates (which remained at 3.5% between April 2006 and November 2008) 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 4 September 2008, while other major currencies, including the renminbi and Hong Kong dollar, followed suit. The ringgit spiked at 3.73 to the US dollar by March 2009, before gradually recovering to 3.00 to the US dollar by mid-2011 and normalising at around 3.10 between 2011 and 2014.

The ringgit would experience more acute plunges in the value since mid-2014 following the escalation of the 1Malaysia Development Berhad scandal that raised allegations of political channeling of billions of ringgit to off-shore accounts, and uncertainty from the 2015–16 Chinese stock market turbulence and the effects of the 2016 United States presidential election results. The currency's value fell from an average of 3.20 to the US dollar in mid-2014 to around 3.70 by early-2015; with China being Malaysia's largest trading partner, a Chinese stock market crash in June 2015 triggered another plunge in value for the ringgit, which reached levels unseen since 1998 at lows of 4.43 to the US dollar on September 2015, before stabilising around 4.10 to 4.20 to the US dollar soon after; the currency would finally plummet and hover below the 1998 lows since November 2016, between 4.40 to 4.50 to the US dollar, in the wake of the victory of pro-protectionist Donald Trump in the 2016 United States presidential election, which has raised questions of United State's participation in the Trans-Pacific Partnership (which Malaysia is a signatory of, and the United States had promptly pulled out from in January 2017) and Malaysia–United States trade as a whole (as the United States is among Malaysia's largest trading partners).

First series (1967)

The first series of sen coins were introduced in 1967 in denominations of 1 sen, 5 sen, 10 sen, 20 sen, 50 sen, followed by the introduction of the 1 ringgit coin (which used the $ symbol and is the largest coin in the series) in 1971. While varied by diameters, virtually all the coins were minted in near-consistent obverse and reverse designs and were very generic, with the obverse depicting the then recently completed Malaysian Houses of Parliament and the federal star and crescent moon from the canton of the Malaysian flag. All coins were minted from cupronickel, the only exception being the 1 sen coin, which was first composed from bronze between 1967 and 1972, then in steel clad with copper from 1973 on. The 50 sen coin is the only one in the series to undergo a redesign, a minor 1971 modification on its edge to include "Bank Negara Malaysia" letterings. All coins have the initials GC on the reverse, below the Parliament House. It stands for Geoffrey Colley, Malaysia first coin series' designer. The 1 ringgit coin was never popular at the time due to being in conflict with a banknote of equal face value, similar to the current situation regarding the 1 dollar coin of the United States dollar.

The coins of this first series were identical in size and composition to those of the former Malaya and British Borneo dollar. Though the Malayan currency union coins were withdrawn, they still appear in circulation on very rare occasion.

Minting of the first sen series ended in 1989, when the second series was introduced. The older coins remain legal tender as of 2013, but have steadily declined in number and are seldom seen in circulation.

Second series (1989)

The second series of sen coins entered circulation in late-1989, sporting completely redesigned observes and reverses, but predominantly retaining the design of edges, diameters and composition of the previous series' coins previous to 1989, the 1 ringgit coin being the exception. Changes include the depiction of items of Malay culture on the obverse, such as a local mancala game board called congkak on the 10 sen and the wau bulan or "moon kite" on the 50 sen among other things, as well as the inclusion of a Hibiscus rosa-sinensis (Malay: Bunga Raya), the national flower of Malaysia, on the upper half of the reverse. The second series was designed by Low Yee Kheng.

In addition to changes on its observe and reverse, the size of the 1 ringgit coin was also reduced from a diameter of 33 mm to 24 mm, and was minted from an alloy of copper, zinc and tin, as opposed to the first series' cupronickel. The $ symbol was brought over to the new coin, but was dropped in favour of "RINGGIT" for coins minted from 1993 onwards. On 7 December 2005, the 1 ringgit coin was demonetised and withdrawn from circulation. This was partly due to problems with standardisation (two different versions of the second series coin were minted) and forgery.

As of 1 April 2008, a rounding mechanism of prices to the nearest 5 sen, applied to the total bill only, is in force, which was first announced in 2007 by Bank Negara Malaysia, in an attempt to render the 1 sen coin irrelevant. Individual items and services can still be priced in multiples of 1 sen with the final totalled rounded to the nearest 5 sen. For example, purchasing two items priced RM4.88 and RM3.14, totalling RM8.02, would then be rounded to RM8.00. If each item had been individually rounded (to RM4.90 and RM3.15 respectively) the incorrect total would have been RM8.05. In practice, individual items will probably remain priced at so-called "price points" (or psychological pricing and odd-number pricing) ending in 98 and 99 to maximise rounding gains for the vendor, especially in the case of single item purchases. Existing 1 sen and ringgit coins in circulation remain legal tender for payments up to RM2.00.

Third series (2012)

The third series of coins were announced on 25 July 2011, first being issued as commemorative coins to mark their release on 16 January 2012. The third series carry a theme named "Distinctively Malaysia" and are inspired from motifs of flora and fauna drawn from various cultures in Malaysia to "reflect the diversity and richness of Malaysia's national identity". The denominations issued are 5, 10, 20 and 50 sen. On 24 October 2011, Deputy Finance Minister Datuk Donald Lim named Poogsan Corporation of South Korea as the series' coin suppliers and the coins are minted at the Bank Negara Mint in Shah Alam.

According to Lim, costs in producing the coins will be reduced by 49% due to the change in metal composition. Other changes in the series include the diameter, the colour on the 20- and 50 sen coins (from silver to yellow) and a redesign on the obverse (featuring different motifs for each denomination), fourteen dots symbolising the thirteen states and the collective Federal Territories, and five horizontal lines indicating the five principles of Rukunegara.

The 50-cent coin is more distinctive than the other denominations. The round shape of the coin has nine indentations, forgoing the original "BANK NEGARA MALAYSIA" lettering. The obverse does not feature the five horizontal lines, but instead a latent image security feature is placed over the coin, where lettering of the denomination "50" and "SEN" can be seen when the coin is tilted slightly.

The 20 sen and 50 sen coins look similar to €0.20 and €0.50 coin in size, design and colour, however they are only worth at €0.047 and €0.12 respectively. The edges of the coins however, are similar to €0.20 for 50 sen coins and €0.50 for 20 sen coins to distinguish it with €0.20 and €0.50 euro coins.

Kijang Emas

Three denominations of gold bullion coins, the "Kijang Emas" (the kijang, a species of deer, being part of Bank Negara Malaysia's logo) are also issued, at the face value of RM 50, RM 100 and RM 200, weighing ¼ oz, ½ oz and 1 oz respectively. It is minted by the Royal Mint of Malaysia and was launched on 17 July 2001 by Bank Negara Malaysia, making Malaysia the twelfth country to issue its own gold bullion coins. Like other bullion coins issued around the world, the Kijang Emas is primarily used as an investment rather than day-to-day circulation. The purchase and reselling price of Kijang Emas is determined by the prevailing international gold market price.