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Exchange Rate Exposure and Crude Oil Price: The Case of an Emerging Market

Author

Listed:
  • Meen Chee Hong

    (Graduate School of Business, Universiti Sains Malaysia, 11800 USM Pulau Pinang, Malaysia)

  • Ei Yet Chu

    (Graduate School of Business, Universiti Sains Malaysia, 11800 USM Pulau Pinang, Malaysia)

  • Saw Imm Song

    (Faculty of Business Management, Universiti Teknologi MARA, 13500 Pulau Pinang, Malaysia)

Abstract

The purpose of this study is to examine the depreciation of USD and crude oil price on exchange rate exposure in Malaysia. Based on the argument that domestic and foreign markets could affect foreign exchange exposure, the study examined 993 public listed firms that involved in domestic business, foreign sales, and assets, respectively. The sample period of 2014 to 2016 illustrates different time-varying conditions when the depreciation of Ringgit Malaysia and crude oil price were the most severe for the last decades. The findings show that firms with foreign sales face the most significant negative exposure of foreign exchange, followed by domestic firms and firms with foreign assets. The study shows that many Malaysia export firms are not effective in hedging, hence, they did not benefit from the depreciation of Ringgit Malaysia and crude oil price. The study concludes that there is an influence of domestic and foreign market effects on foreign currency exposure in the economy.

Suggested Citation

  • Meen Chee Hong & Ei Yet Chu & Saw Imm Song, 2018. "Exchange Rate Exposure and Crude Oil Price: The Case of an Emerging Market," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 14(2), pages 157-184.
    • Handle: RePEc:usm:journl:aamjaf01402_157-184
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    References listed on IDEAS

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    Cited by:

    1. Taufeeque Ahmad Siddiqui & Haseen Ahmed & Mohammad Naushad & Uzma Khan, 2023. "The Relationship between Oil Prices and Exchange Rate: A Systematic Literature Review," International Journal of Energy Economics and Policy, Econjournals, vol. 13(3), pages 566-578, May.
    2. Bao Quan Lock & Ei Yet Chu & Saw Imm Song & Lian Yin Lee, 2019. "Exchange Rate Movements, Earnings Management and Stock Returns in Malaysia," Capital Markets Review, Malaysian Finance Association, vol. 27(1), pages 53-68.

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