KUALA LUMPUR (July 12): The ringgit hit its lowest level in seven years against the pound sterling as it fell to as low as 6.0356 on Wednesday (July 12), after breaching the RM6 to £1 mark on Tuesday, when it dipped to 6.0164.  

At the time of writing, the ringgit has recovered slightly to 6.0145 against the pound sterling.

The last time the ringgit dipped to RM6 against the pound was on May 31, 2016 when the exchange rate stood at 6.0299.

The ringgit was not the only currency that dipped against the pound, which has also strengthened against other regional currencies and the greenback this year, making it one of the top performing currencies this year.

The pound's strength comes on the back of expectations that the Bank of England will raise interest rates further as wages rose faster than anticipated in May, while inflation remained sticky.

It was reported that wage growth increased by 7.3% in three months to May compared to the previous year, driven by a strong rise in private-sector pay growth. While wage growth grew quickly, the unemployment rate rose to 4% in the three months to May, from 3.8% earlier.

Inflation in the UK also remained high at 8.7% in May, the highest in the Group of Seven nations.
 

Against the greenback, the pound has increased by close to 8% over the last one year. Meanwhile, our neighbour Indonesia has seen the pound gaining about 9.74% over the rupiah over the same period. At the same time, the Singapore dollar has fallen 3.21% against the pound, while the Thai baht dropped 4.27%.

However, the pound seems to have appreciated the most against the ringgit, gaining 12.15% against the local note over the last one year. On a year-to-date basis, it has appreciated 13% against the ringgit.

The UK benchmark interest rate is currently at 5%, with expectations that it would hit 6% by the end of the year.

Meanwhile, Malaysia’s overnight policy rate is expected to remain at 3% till the end of the year.

The wide interest rate differential between the two countries makes the pound a more attractive currency to hold, compared with the ringgit.