– Central Bank governor says poor performance of Malaysian currency due to lack of Fed interest rates hike and domestic political scandal
By P Prem Kumar
KUALA LUMPUR – Malaysia’s Central Bank Governor has blamed the Ringgit’s continued poor performance on uncertainty stemming from a potential interest rate hike by the U.S. Federal Reserve, and state owned 1Malaysia Development Berhad (1MDB) controversies.
Zeti Akhtar Aziz said current ambiguity over how long the Fed will maintain zero-bound interest rates is generating volatility, as economies across the world continue to grapple with the Fed’s “extreme and unprecedented measures”.
“However, their window of opportunity to raise [interest] rates has closed for the moment due to [global] uncertainty, and they didn’t want to generate more instability,” she told reporters at an economics update panel session in Kuala Lumpur on Monday.
The Ringgit — the worst-performing Asian currency this year — has been hit by falling oil prices as well as increased instability in the domestic and international environment.
Aziz, globally known as the guarantor of Malaysia’s financial stability, said the ongoing 1MDB controversies were also impacting the Ringgit, since they have hit the image of the currency.
Allegations of graft and financial mismanagement have dogged state fund 1Malaysia Development Bhd (1MDB), which is $11 billion in debt.
“We do not need another scandal. We do not need political uncertainty. All issues pertaining to 1MDB should be resolved. It is only then we can see the ringgit rebound,” she said.
However, she also claimed that ongoing probes into the financial situation of 1MDB — Prime Minister Najib Razak’s brainchild — will resolve the uncertainty.
“[Ongoing investigations] are going to yield an outcome. But for that to happen, we must wait,” she said.
A fortnight ago, the Ringgit hit 4.3405 against the dollar — a 17-year low — as the greenback strengthened against most Asian currencies.
It was trading at 4.2460 Monday.
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