Examining the determinants that affect the foreign exchange rate in Malaysia

Recently, there is a major change in Ringgit Malaysia (MYR) which is decreasing in value and it brings large effect in Malaysian economy. The aim of this study is to examine the relationship between inflation rate (IF), interest rate (IR), world crude oil price (OP) and term of trade (TOT) with the changes in foreign exchange rate (ER). This study utilized quarterly data collected from data stream software and trading economics website over the period of January 2010 – December 2017. Multiple Linear Regression model is used in order to do the empirical analysis using eviews software. The findings reveal that there is positive significant relationship between IF and ER in
Malaysia while there is negative significant relationship between OP and TOT toward ER in Malaysia. However, the relationship between IR and ER in Malaysia is found negative insignificant.