The ongoing slide in the ringgit puts it a whisker away from a record low, and continued weakness in Malaysia’s exports as well as dollar strength may just push the currency past that level.
The Malaysian ringgit is about 2 per cent away from reaching 4.8850 per US dollar, a level last seen in 1998 when the Asian financial crisis ravaged the region’s currencies. The local currency has dropped nearly 4 per cent this year.
“There is a risk that the ringgit will reach a new all-time low,” said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group. “Exports are not recovering unlike those in other Asian economies and economic growth may remain lacklustre.”
Gantry cranes at Port Klang, Malaysia’s Selangor state. Slumping exports have weighed on Malaysia’s economic growth. Photo: Bloomberg
China’s floundering economy is hurting the Southeast Asian nation’s exports, which declined for a 10th consecutive month in December. While Malaysia still holds a current-account surplus, its ratio to gross domestic product has fallen to near the lowest in 20 years, limiting support for the currency, according to Bloomberg Intelligence. Trade data for January is due on Tuesday.
Slumping exports have also weighed on Malaysia’s economic growth. Coupled with concerns over political stability following alleged attempts to bring down Prime Minister Anwar Ibrahim’s administration and the persistent strength of the US dollar, the outlook for the ringgit looks grim.
Traders will keep an eye on inflation data this week, which will offer clues on Bank Negara Malaysia’s ability to maintain interest rates and support the currency should the US dollar’s strength prevail as investors pare bets on Federal Reserve rate cuts.
The ringgit hit 4.7958 against the US dollar in October, the weakest since 1998. A decline beyond this level may bring the 4.82 to 4.85 ringgit-per-dollar range into focus, according to a technical analysis.
