Malaysian Ringgit Falls To 17-year Low Against U.S. Dollar

The Malaysian Star quoted Liow as saying that the government will allow the ringgit’s depreciation to halt the economy.

The local currency fell against the yen to 3.1723/1752 from 3.1492/1523 yesterday.

The ringgit also dropped to its lowest level on record against the greenback, changing hands at 4.1270 to the US dollar.

The ringgit has declined more than 25 percent over the past year and it weakened another 1.74 percent to 4.0805 to the U.S. dollar by late afternoon trading on Friday. The ringgit is seen finding support around the 4.14 level.

Malaysia government’s five-year bond yield rose to 3.708 per cent, its highest since June 29.

“Malaysia is probably a relatively easier target for markets and this is why we’re seeing continued outflows and pressure on the currency”, said Mitul Kotecha, head of Asia Pacific foreign-exchange strategy at Barclays Plc in Singapore.

Investor sentiment toward Malaysia has deteriorated in recent weeks as Prime Minister Najib Razak became engulfed in a scandal over indebted state fund 1MDB.

“Furthermore, Malaysia has spent tremendous time and efforts to rebuild investors’ confidence on the country following the introduction of capital controls during the 1997 to 1998 Asian financial crisis and built a reasonable-sized debt market, it is unlikely for the entral Bank to revisit the capital control measures”.

The ringgit has slipped RM3.90 against the US dollar on Thursday, which considered to be the lowest in 17 years.

Despite the drop, the foreign exchange reserves as at end-July 2015 are still sufficient to finance 7.6 months of retained imports, albeit deteriorating from 8.4 months of retained imports in the same period a year ago explained RHB Research.

“The ringgit remains vulnerable”, said Khoon Goh, a Singapore-based strategist at Australia & New Zealand Banking Group Ltd. “Governor Zeti said that the central bank will set about rebuilding reserves, which means there will be a limit to any rally”.