The ringgit outlook and just how bad can it get

Malaysia seems to have received a lot of accolades due to its resilient economy, having recovered  from the asian financial crisis without a bailout from the IMF.

I'm not so sure it's really well deserved, because when we look at the Ringgit, the currency isn't far away from all time lows versus the US dollar.  If you recall the peg rate, it was fixed at RM 3.8 to the US Dollar and we are now at RM 3.53 versus 1 USD.  Perhaps economists have not looked at Malaysia over a long enough time frame.  I'ts been roughly 10 years, surely the Ringgit is worth a lot more now than back in 1997, but according to the markets it's not.

The major problem I can see is confidence.  If most markets are doing well, inevitably international investors will invest in Malaysia, but it won't be a without reservations because at any time, Malaysia can re-instate capital controls.  

Ultimately, the capital controls of 1997 still haunt the country today.  Investment in Malaysia has never been quite the same since then.  In order to purge the stigma of capital controls, the government would need to be controlled by the opposition.

The current ruling coalition will always have investors anxious as they are the ones who instituted capital controls.  But even then, the saying goes "the genie is out of the bottle."  I think even the opposition will consider capital controls if they are desperate.

The Ringgit has two distinctive down trend lines.  It will need to get past these two trend lines with some authority.  It's likely that prices will dither around these levels for at least the next 6 months.  Note that the currency is 1 MYR will buy x amount of USD, hence the small values.