Effective Exchange Rate Indexes: June 2018 Update

This post is seriously late, as I’ve just switched laptops and my editing software is being cantankerous. However, the NEER and REER page has been updated, as has the Google Docs version.

Summary

Despite the moves in the bilateral USDMYR exchange rate, there has been almost no movement in either the NEER and REER since February. This also applied to the narrow and ASEAN indexes as well. In other words, almost all the currency volatility of the past six months has been due to USD movements, with very little coming from other currencies. The nominal broad index was up 5.30% yoy, but just -0.15% on the month (REER: 4.78%, -0.15%).

Breaking down on a bilateral basis, movements were predictably mixed, with the Ringgit roughly up against half the basket and down on the other half. On a cumulative three month basis, the MYR has gained the most against the EUR (+3.15%), the GBP (+2.68%), the INR (+1.78%), the THB (+1.45%), and the AUD (+1.15%). The biggest losses were against the USD bloc countries in the basket, I.e. the USD (-2.35%), the HKD (-2.28%), and the VND (-2.18%).

Changelog:

1. Indexes have been updated to June 2018
2. CPI deflators and forecasts have been updated for May/June 2018
3. Trade weights were updated to March 2018. This required revisions to all the indexes from Jan-18 onwards

Effective Exchange Rate Indexes: March 2018 Update

The NEER and REER page has been updated, as has the Google Docs version.

Summary

A late CPI release by Taiwan caused this update to be late, as well as an update to the trade weights, based on export-import data for 4Q17.

On contrast to the last few months, the Ringgit was largely stable for March 2018, though still tending to the upside.The nominal broad index was up 6.42% yoy, but just 0.05% on the month (REER: 6.23%, 0.06%). The picture for the sub-indexes was equally mixed, with the nominal broad index down –0.14% compared to February, but with the real index up 0.06%.

Still, gains were broad-based, with the Ringgit up against 11 currencies and down against just 4. The biggest gain was against the AUD (+1.52% mom), building further on gains since the middle of last year. The biggest decline was against the JPY (-1.58%), though this was after rising 5 out of the last 6 months.

Changelog:

1. Indexes have been updated to March 2018
2. CPI deflators and forecasts have been updated for Feburary/March 2018
3. Trade weights were updated to December 2017. This required revisions to all the indexes from Jan-17 onwards

Effective Exchange Rate Indexes: February 2018 Update

The NEER and REER page has been updated, as has the Google Docs version.

Summary

This update is a little late for a few reasons. First, I was travelling the whole of last week, and simply hadn’t the time. Second, there were major updates to a few of the CPI series (changes of base years), including the one for Malaysia, that required rejigging the spliced deflator series.

On the whole though, the picture hasn’t changed much since December 2017. The Ringgit was still climbing against most currencies, which resulted in a continued increase in all of the indexes. On the year, the nominal broad index was up 5.3% in January and 6.4% in February, while the real broad index was up 3.9% and 6.3%. The picture was broadly the same across all the sub-indexes.

On a bilateral basis, the Ringgit was up against 14 currencies in January and 11 in February (relative to the 15 that make up the broad index). The biggest gains were against regional currencies, with the only net declines over Jan-18-Feb-18 recorded against the EUR, JPY and CNY.

Changelog:

1. Indexes have been updated to February 2018
2. CPI deflators and forecasts have been updated for January/Feburary 2018
3. CPI deflator data revisions were required for Malaysia, Thailand, and the Phillippines. This required revisions to the indexes from Jan-17 onwards

Effective Exchange Rate Indexes: December 2017 Update

The NEER and REER page has been updated, as has the Google Docs version.

Summary

December saw the Ringgit gaining for a fourth straight month across all the indexes. The NEER hit 4.1% yoy, while the REER rose 2.1%. On the month, gains accelerated, with the Ringgit gaining 1.7% in nominal terms, and 1.5% in real terms. Gains were across the board, with appreciation recorded against all 15 currencies in the indexes, the first time that has happened since April 2016.

The largest (m-o-m) gains were against the JPY (2.33%), IDR (2.30%), HKD (2.25%) and USD (2.16%). The smallest gains were against the KRW (0.71%) and GBP (0.86%).

Changelog:

1. Indexes have been updated to December 2017
2. CPI deflators and forecasts have been updated for November/December 2017
3. Trade weights have been updated to 3Q2017. This caused revisions to the indexes from January 2017 onwards

Effective Exchange Rate Indexes: November 2017 Update

The NEER and REER page has been updated, as has the Google Docs version.

Summary

The Ringgit has continued to strengthen across October and November. The yoy growth numbers all turned positive in November with the exception of the Real ASEAN sub-index, while mom growth has been positive for three months running. Gains were broad based, though skewed a little more against the majors, and less so against regional counterparts. The Broad Nominal Index rose 0.36% in October and 1.26% in November, while the Broad Real Index rose 0.72% in October and 1.30% in November.

In November, the only drop recorded was against the KRW (-1.35%), which has been on a tear this year. The biggest gain recorded was against the AUD (Oct: 1.89%; Nov: 3.64%).

Changelog:

1. Indexes have been updated to November 2017
2. CPI deflators and forecasts have been updated for October/November 2017

Effective Exchange Rate Indexes: September 2017 Update

The NEER and REER page has been updated, as has the Google Docs version.

Summary

September was a turnaround month for the Ringgit. The year on year changes are still negative, but all six indices posted gains on the month, and the best positive performance since May-17. Capital inflows were apparently the main reason. The Broad Nominal index rose 1.26%, while the Broad Real index rose 1.04%.

On a bilateral basis, the Ringgit rose against 14 out of 15 currencies. The biggest gains were against the JPY (+2.66%), the INR (+2.49%), the KRW (+1.86%), the USD (+1.72%), and the PHP (+1.70%). The only drop recorded was against the GBP (-1.22%).

Changelog:

1. Indexes have been updated to September 2017
2. CPI deflators and forecasts have been updated for August/September 2017

Effective Exchange Rate Indexes: August 2017 Update

The NEER and REER page has been updated, as has the Google Docs version.

Summary

August was not a good month for the Ringgit, with drops posted across all six indices. Most of the losses were due to safe haven buying of the JPY and EUR, along with skepticism over the trajectory of US policy, both fiscal and monetary. The result was a -1.21% mom decline in the Narrow Nominal Index and a –1.17% drop in the Real Narrow Index.

On a bilateral basis it was a mixed bag, with gains recorded against 7 out of 15 currencies. The biggest drops were against the EUR (-2.31%), the JPY (-2.21%), the CNY (-1.42%), the AUD (-1.30%), and the THB (-1.26%). The largest gains were against the PHP (+0.84%) and the GBP (+0.47%).

Changelog:

1. Indexes have been updated to August 2017
2. CPI deflators and forecasts have been updated for July/August 2017
3. Trade weights have been updated to 2Q2017, which entails revisions for Mar-Jul 2017

Effective Exchange Rate Indexes: July 2017 Update

The NEER and REER page has been updated, as has the Google Docs version.

Summary

After two months of gains, the Ringgit has reversed course, seeing declines across all six indexes. The REER is roughly where it was back in December, though the NEER managed to hold on to some gains, and is only slightly below November’s level. Overall, most of the indexes lost about -0.80% for July versus June, except for the narrow REER, which lost a little over -1.03%.

On a bilateral basis, losses were recorded against 12 out of the 15 currencies tracked. The biggest losses were against the AUD (-3.44%), the EUR (-2.85%) and the GBP (-1.73%), with the only gains recorded against the PHP (1.16%), the JPY (1.04%) and the TWD (a marginal 0.13%).

Changelog:

1. Indexes have been updated to July 2017
2. CPI deflators and forecasts have been updated for June/July 2017

Effective Exchange Rate Indexes: June 2017 Update

The NEER and REER page has been updated, as has the Google Docs version.

Summary

Over the past two months, the Ringgit has continued to gain ground, posting advances across all six indices being tracked. Most of the gains were posted in May (2.06% in the case of the real broad index), with some follow through in June (0.31%). For the latter, most of the gains were against the periphery, as the narrow index posted a small loss (-0.01% for the real narrow index). The strongest gainer was the real ASEAN index, which rose 2.34% in May and a further 0.33% in June. All told, the Ringgit has now recovered nearly all of the ground lost in the aftermath of the US presidential election.

On a bilateral basis, gains were recorded against 13 out of 15 currencies tracked in May, and 10 out of 15 in June. Across both months, the Ringgit gained against every major currency except the EUR (-1.79%), with the biggest gainer being against the JPY (+3.59%). Also, for the first time since January 2017, the REER is above the NEER, signaling a (very minor) undervaluation.

Changelog:

1. Indexes have been updated to June 2017
2. CPI deflators and forecasts have been updated for May/June 2017
3. Trade weights have been updated to 1Q2017, which entails revisions for Jan-Apr 2017

Effective Exchange Rate Indexes: April 2017 Update

The NEER and REER page has been updated, as has the Google Docs version.

Summary

For the first time since April last year, the MYR indexes have gained across the board. Having said that, the movement has been relatively small – about 0.22% on a nominal basis, and 0.27% on a inflation adjusted basis. The gains against ASEAN have been smaller, at 0.17% for both real and nominal indexes. The revised data for March however, also shows the MYR sustaining above the 100 pt index mark at 100.49, versus the preliminary reading of 99.85.

On a bilateral basis, the picture is more mixed, with gains recorded against 9 out of the 15 currencies in the broad basket. The biggest gain recorded was against the AUD (1.94%), continuing on from last month’s movement, with the KRW (0.88%) and HKD (0.84%) rounding out to the top-3. The biggest drops were against the JPY (-1.71%), GBP (-1.64%) and INR(-1.20%). The indexes continue to be crossed, with the NEER remaining above the REER.

Changelog:

1. Indexes have been updated to April 2017
2. CPI deflators and forecasts have been updated for March/April 2017. There was a technical change in the splicing procedure for Thailand’s CPI deflator, which resulted in some very minor changes to the historical series. This only affects the Real Broad and Real ASEAN indexes.

Effective Exchange Rate Indexes: March 2017 Update

The NEER and REER page has been updated, as has the Google Docs version.

Summary

MYR is losing out on the emerging market rally. Both indexes continued to decline, despite stability against the USD. There was a slight uptick in the Nominal Narrow Index (top 5 trading partners), but the Real Narrow Index dropped 0.26%, as inflation accelerated faster in Malaysia. The Real ASEAN index dropped the most month on month (-0.76%), but having said that, March marks the first time this particular index has dropped below 100 since June 2000.

Despite this, on a bilateral basis, MYR appears to have turned around, or at least stopped losing ground. Gains were recorded aganst 9 out of the 15 currencies in the broad basket. The nine-month losing streak against the AUD finally ended (+0.65%), with the biggest gain coming against the GBP (+1.31%). The biggest drop was against the INR (-1.65%), followed by the TWD (-0.61%) and KRW (-0.58%).

One last thing: The indexes have crossed, with the NEER now above the REER. This is largely due to inflation in Malaysia accelerating faster than our peers. Technically, if you believe this stuff, that indicates the MYR is now overvalued, though I’d reserve judgement until I get a chance to take into account nominal interest rates as well (standard UIP model).

Changelog:

1. Indexes have been updated to March 2017
2. CPI deflators and forecasts have been updated for February/March 2017

Effective Exchange Rate Indexes: February 2017 Update

The NEER and REER page has been updated, as has the Google Docs version.

Summary

Despite relative stability against the USD in February, the MYR continued to decline on a multilateral basis. The NEER fell -0.53% mom, while the REER fell-0.91%. More moderate drops were seen in the sub-indices.

On a bilateral basis, MYR is now on a nine-month losing streak against the AUD (-2.27%), though the biggest drop was against the KRW (-3.01%). Gains were recorded against the PHP (+0.79%), HKD (+0.37%) and USD (+0.32%). What’s interesting is that, despite the continued decline, the picture appears to be balancing out a little – gains were recorded against 6 currencies (out of a total of 14 in the indexes), versus 4 last month, and just 1 in December and November.

Changelog:

1. Indexes have been updated to February 2017
2. CPI deflators and forecasts have been updated for January 2016/December 2017
3. Trade weights have been updated for the 4Q16

Effective Exchange Rate Indexes: January 2017 Update

The NEER and REER page has been updated, as has the Google Docs version.

Summary

Both the NEER and REER continued to decline in January, by 0.46% and 0.44% respectively, though the depreciation pace has dropped off substantially. Again, this marks new historical lows for these indices (since the beginning of the series in January 2000).

Looking at the breakdown, however, it’s really stability against the USD (and some gains against the GBP and INR), and negative against virtually everyone else. The biggest dropoff is against the AUD, where the MYR has been on an 8 month losing streak for a cumulative -11.8%.

Changelog:

1. Indexes have been updated to January 2017
2. CPI deflators and forecasts have been updated for December 2016/January 2017

Effective Exchange Rate Indexes: December 2016 Update

The NEER and REER page has been updated. For convenience, I’ve added a Google Docs version of the data (link at the bottom of the table).

Summary

Both the NEER and REER continued to decline in December, by 1.2% and 1.5% respectively. I haven’t extended either index before 2000, as the introduction of the Euro in 1999 makes it hideously complicated to do so, but December marks the lowest levels for either index as far as the data goes back.

Just as in November, the decline was broad-based, with the biggest drops recorded against the CNY and the USD (both -0.3%). The Ringgit however continued to climb against the JPY, up 0.35% for the month.

Changelog:

1. Indexes have been updated to December 2016
2. CPI deflators and forecasts have been updated for November/December 2016
3. Korea has rebased their CPI to 2015, which resulted in some revisions to the broad indexes

Effective Exchange Rate Indexes: November 2016 Update

The NEER and REER page has been updated.

Summary

Since there’s a lot of interest in exchange rate movements this past few weeks, I’ve accelerated the timetable for this month. As expected, we’re seeing broad based declines across all the indexes, with the nominal broad index falling -2.03% in November, and -2.11% in real terms, compared to –0.61% and –0.79% in October. On a yoy basis though, the Ringgit has dropped just –0.74% in nominal terms and is actually up 0.08% in real terms. Across the currency components, the sharpest drops were recorded against the USD, GBP and HKD (no surprise, since the HKD is on a currency board with the USD), and MYR falls were recorded against every component currency with the exception of the JPY, which saw a 0.7% increase.

Changelog:

1. Indexes have been updated to November 2016
2. CPI deflators and forecasts have been updated for October/November 2016
3. Trade weights have been updated for the 2Q2016 and the 3Q2016. This caused revisions to the indexes from April 2016 onwards

Effective Exchange Rate Indexes: October 2016 Update

The NEER and REER page has been updated.

Summary

Since the last update in August, both broad indexes have slowly declined, and are now close to revisiting last year’s lows, at least as of the cut-off date (October 2016). The declines have been broad based since April, against all currencies with the exception of the GBP (still +8% since April). I’m expecting to see a further decline in November.

Changelog:

1. Indexes have been updated to October 2016
2. CPI deflators and forecasts have been updated for September/October 2016

Effective Exchange Rate Indexes: August 2016 Update

The NEER and REER page has been updated.

Summary

The last three months have seen some stability for the Ringgit, with the strong bounce up from April eventually losing steam. Over August, both the nominal and real broad indexes are roughly 3 points down from the April peak, and a point down from July. Relative to April, the Ringgit weakened against the currencies of all maor trade partners, with the understandable exception of the GBP.

Changelog:

1. Indexes have been updated to August 2016
2. CPI deflators and forecasts have been updated for July/August 2016
3. Change of CPI deflator for Japan (from 2010=100 to 2015=100). This caused some revisions to the entire time series for both Broad and Narrow indexes

Effective Exchange Rate Indexes: April 2016 Update

The NEER and REER page has been updated.

Summary

The bounce up from January lows continued in April, with the nominal broad index gaining 2.74 points to 90.77 (p) and the real broad index gaining 3.1 points to 93.33 (p) in April. The Ringgit advanced against the currencies of all of Malaysia’s major trading partners, but in particular the US Dollar bloc (USD, CNY, HKD, PHP and VND) by around 3.8%-4.2% during the month. Also of note is the gain against the GBP of around 3.8%, largely due to uncertainty over the June referendum.

Changelog:

1. Indexes have been updated to April 2016, with revisions for January to March 2016
2. CPI deflators have been updated for March/April 2016

Effective Exchange Rate Indexes: March 2016 Update

The NEER and REER page has been updated.

Summary

The Ringgit continued to gain ground in both the broad and narrow indexes, driven by advances against the USD, CNY, HKD and GBP, although the pace of advance slowed. The broad nominal index rose 1.22 points to 88.03 (p), while the broad real index rose 1.41 points to 89.79 (p).

Changelog:

1. Indexes have been updated to March 2016, with revisions for January and February 2016
2. CPI deflators have been updated for February/March 2016
3. Both real and nominal ASEAN indexes have been completely revised, due to a spreadsheet error

Effective Exchange Rate Indexes: February 2016 Update

The NEER and REER page has been updated.

Summary
All indexes showed gains during the month, with the Broad NEER gaining 2.3 points to 86.81 (p), and the Broad REER gaining 2.5 points to 88.12 (p). The Ringgit recorded gains against all index component currencies in February. On a trade weighted basis, the biggest factors contributing to the increase in the indexes were gains against the CNY, USD, SGD and KRW.

Changelog:

1. All indexes have been updated to February 2016, with revisions from October 2015 onwards
2. Trade weights have been updated for the 4Q2015 onwards
3. CPI deflators have been updated for all countries up to December 2015, with many countries up to January 2016