Ringgit Falls for Fifth Day on Lower Oil, China Growth Concern, Brazil's Downgrade

KUALA LUMPUR  — Malaysia’s ringgit fell for a fifth day, the longest run of losses in a month, as an overnight decline in energy prices and an economic slowdown in China damped demand for the oil-exporting nation’s assets.

Brent crude slumped 4 per cent yesterday, extending a decline that has contributed to a 19 per cent depreciation in the ringgit this year in Asia’s worst performance. China, Malaysia’s biggest overseas market, reported today its exports contracted for a second month in August, while imports shrank the most since May.

“There are uncertainties over China’s growth, declining oil prices, US Fed rate normalisation and global risk aversion,” said Leong Sook Mei, Southeast Asia head of global markets research at Bank of Tokyo-Mitsubishi UFJ in Singapore. “It’s a given that, in this kind of environment, Asian currencies will probably be very weak.”

The Malaysian ringgit fell to a new low of 3.0771 against the Singapore dollar early on Thursday (Sep 10), hurt by a drop in oil prices and a downgrade of Brazil’s credit rating which worsened sentiment towards emerging markets.

Around 1.20 pm, the ringgit was trading around 3.0574 to the Sing dollar, recovering from the record low of 3.0771 around 8.15 am.

The currency, which has lost 4 per cent in the past five days, earlier fell as much as 1 per cent to 4.3730, the lowest since January 1998. The ringgit also hit a new 17-year low of around 4.379 to the US dollar earlier on Thursday.

Standard & Poor’s on Wednesday (9 Sept) downgraded Brazil’s sovereign credit rating to BB+, or one notch below investment grade, sparking a selloff in emerging market assets.


A 3.9 percent drop in Brent crude overnight also dampened the revenue outlook for Malaysia, Asia's only major net oil exporter.

Yuan expectations

The ringgit’s drop was due to expectations of a depreciation in the yuan after China reported a decline in foreign-exchange reserves yesterday, according to Dushyant Padmanabhan, a strategist with Nomura Holdings Inc. in Singapore.

A majority of more than 150 market participants surveyed by Moody’s Investors Service expect the ringgit and oil prices to stabilise, with 44 per cent saying they expect the currency to trade between 4 and 4.50 a dollar, according to a statement from the rating company issued today.

Global funds reduced holdings of Malaysian government bonds by 4.3 per cent to RM166.1 billion (US$38 billion) in August from July, the lowest level in five months, according to central bank data.

Sovereign bonds retreated, with the 10-year yield rising two basis points to 4.26 per cent, according to prices from Bursa Malaysia. — Bloomberg