The ringgit weakened the most in Asia on concern Malaysia’s foreign-exchange reserves dropped to the lowest level since the 2008 global credit crunch, reducing ammunition to defend the region’s worst-performing currency. The ringgit opened lower against the US dollar as foreign banks continued to offload the currency, a trader said.
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The ringgit has slipped RM3.90 against the US dollar on Thursday, which considered to be the lowest in 17 years.
“Given Malaysia’s very large external sector, the move is not warranted”. Sentiment is also negative because weak commodity prices and a slowing Chinese economy may hurt Malaysia’s exports and government finances.
“Pegging the ringgit would mean that we will be reversing a few of the gains that we have reap over the years through the liberalisation”, he said. Investors have been losing confidence in the country’s assets as pressure grows on Prime Minister Najib Razak amid graft allegations involving the indebted 1MDB state fund.
The ringgit slid to 3.9000 as of 8.30am Singapore time, its weakest since Sept 2 1998, a day before the government pegged was pegged at 3.8000.
The currency declined 0.3 per cent at 3.8905 a dollar as of 12:13 pm in Kuala Lumpur, prices from local banks compiled by Bloomberg show.
Julia Goh, economist at United Overseas Bank in Malaysia, said the reserves’ decline to below US$100 billion was largely expected due to BNM’s efforts to “smoothen out extensive volatility”.
“Investors always try to think ahead of regulations, so it is not surprising to see they sell off everything”.
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The South Korean won lost 4.7 per cent against the dollar in July, underperforming other Asian currencies.
