Malaysian ring­git at low­est since Asia fi­nan­cial cri­sis

Kuwait Times - - BUSINESS -

KUALA LUMPUR: Malaysia’s ring­git hit its low­est level against the dol­lar since the Asian fi­nan­cial cri­sis as emerg­ing-mar­ket cur­ren­cies are ham­mered by a flight of cap­i­tal fuelled by an ex­pected rise in US in­ter­est rates next year. The green­back has soared since Don­ald Trump won the US elec­tion last month, with traders bet­ting his plans for big in­fras­truc­ture spend­ing and tax cuts will fan in­fla­tion, forc­ing the Fed­eral Re­serve to tighten mon­e­tary pol­icy.

But while his plans have bets that the US econ­omy will take off, there are fears over his pro­tec­tion­ist rhetoric. This in turn has put trade-re­liant na­tions un­der pres­sure with their cur­ren­cies feel­ing the strain. In early trade yes­ter­day the Malaysian ring­git fell to 4.4805 per dol­lar, its worst read­ing since 1998 dur­ing the Asian melt­down. The ring­git had al­ready been among Asia’s worst-per­form­ing cur­ren­cies over the past two years ow­ing to a plunge in oil prices and po­lit­i­cal up­heaval stem­ming from a cor­rup­tion scan­dal linked to Prime Min­is­ter Na­jib Razak.

The lat­est fall comes af­ter the Fed raised rates, as ex­pected, but in­di­cated three more next year, rather than the two that traders had priced in. “It is a con­flu­ence of the rel­a­tive de­cline in cash met­ric, high for­eign hold­ing of bonds sold off, in­vestors’ trep­i­da­tion about FX con­trols and the un­der­ly­ing po­lit­i­cal or head­line risks,” Vishnu Varathan, a se­nior econ­o­mist at Mizuho Bank in Sin­ga­pore, told Bloomberg News. Malaysia’s cen­tral bank as­sis­tant gov­er­nor Ad­nan Zay­lani last month poured wa­ter on the pos­si­bil­ity of cap­i­tal con­trols-sim­i­lar to mea­sures im­posed dur­ing the fi­nan­cial cri­sis in the late 1990 — to shield the ring­git, call­ing spec­u­la­tion “base­less”. The ring­git has weak­ened by around six per­cent since Trump’s vic­tory, while most other emerg­ing mar­ket units have also tum­bled, with In­dia’s ru­pee hit­ting a record low at the end of last month.

South Korea’s won, the Thai baht and In­done­sian ru­piah have also suf­fered sharp sell­ing, while even the Aus­tralian and New Zealand dol­lars are also un­der pres­sure. The coun­try re­lies on en­ergy ex­ports and other trade to drive its econ­omy but growth has been slow­ing steadily in re­cent years.

Eco­nomic growth came in at 4.3 per­cent in the third quar­ter, snap­ping a string of five straight quar­ters in which the pace of ex­pan­sion slowed. —AFP

—AFP

KUALA LUMPUR: A screen dis­play­ing var­i­ous for­eign cur­rency ex­change rates in­clud­ing the US dol­lar (top L) against the Malaysian ring­git is seen at a money changer in Kuala Lumpur yes­ter­day.

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