Ringgit weakens beyond 4 per dollar for first time since 1998

The country took the ringgit off the peg in 2005.

Malaysia’s ringgit weakened beyond 4 to the dollar for the first time since 1998 as investors flee the nation’s assets amid a slowing economy and controversy over finances linked to Prime Minister Najib Razak.

The currency tumbled more than 1 percent to 4.0025 a dollar as of 11:02 a.m. in Kuala Lumpur, according to prices from local banks compiled by Bloomberg. It has lost about 20 percent in the past 12 months in Asia’s worst performance.

China’s surprise devaluation of the yuan has lumped more pressure on the ringgiton speculation policy makers will favor weaker exchange rates to prop up faltering exports. Malaysia is already reeling from slumping Brent crude prices that have cut government earnings for the net oil exporter, and a looming U.S. interest-rate increase. Najib has come under the spotlight over a 2.6 billion ringgit ($654 million) donation deposited into his personal bank accounts and which was initially linked to state investment company 1Malaysia Development Bhd.

Global funds have pulled about $3 billion from the nation’s equities in 2015, the most since 2008, and the FTSE Bursa Malaysia KLCI Index has lost more than 13 percent from this year’s high in April. Overseas ownership of Malaysian government and corporate debt fell to the lowest level in three years in July.

The Southeast Asian nation’s foreign-exchange reserves dropped below $100 billion last month for the first time since 2010 to settle at $96.7 billion. The central bank will continue to “smoothen out excessive volatility,” Julia Goh, an analyst at Singapore’s United Overseas Bank Ltd., wrote in a research note on Tuesday. Bank Negara Malaysia failed to stop the ringgit falling through its 1998 peg level of 3.8 a dollar in July.

The monetary authority has spent $25 billion defending the currency since July 2014, after adjusting for valuation effects, Philip McNicholas, a Singapore-based economist at BNP Paribas SA, wrote in a July 24 report. 

- Source: Bloomberg | Aug 12, 2015