Ringgit hits 4.50 against $, breaching psychological mark
THE RINGGIT has hit the psychological mark of 4.50 against the US dollar, as foreign investors continued to pare down their holdings of Malaysian government bonds.
At the same time, Bank Negara issued an extensive frequently asked questions list pertaining to the onshore trading of the unit in conjunction with an effort to stabilise the Malaysian currency, which had been buffeted by various external factors.
In a second day of declines yesterday, the ringgit fell 0.1 per cent against the US dollar to close at a fresh 19-year low of 4.4985 against the greenback. This compared with the previous day’s close of 4.4938.
Foreign selling pressure on local debt was reflected in rising yields, with the benchmark 10-year Malaysian Government Securities (MGS) yields rising 2.8 basis points to 4.226 per cent.
At noon, the Malaysian currency touched an intra-day low of 4.5002 against the greenback, the lowest level since 1998 during the height of the Asian financial crisis.
The government then decided to peg the currency at 3.80 against the greenback to stop the currency’s decline.
As of yesterday, the Malaysian unit, which has lost 0.27 per cent against the US dollar since the start of 2017, was the third-worst performer among Asian currencies, after the yen and Indian rupee.
According to a dealer, the continued weakness of the currency was due to a dampened appetite among foreign investors for ringgit-denominated assets.
This came as the US dollar continued to rally on an improving economic outlook and the prospects of higher interest rates.
That the foreign holdings of Malaysian bonds – in particular, the MGS – remained high would only raise the risk of capital outflows from the country and put the currency under further pressure, he noted.
“There is a lack of foreign appetite for ringgit-denominated assets, as investors expect US Treasury yields and interest rates to trend higher on an improving US economic outlook and optimism that US President-elect Donald Trump would pursue fiscal expansion to fuel the world’s biggest economy,” the dealer explained to StarBiz.
