Ringgit most badly hit among Asian currencies

Malaysian ringgit banknotes of various denominations are arranged for a photograph in Tokyo.
Malaysian ringgit banknotes of various denominations are arranged for a photograph in Tokyo. PHOTO: BLOOMBERG

It declines further after Fed flags rate hike, hitting weakest level against US dollar since January

Asian currencies have all been bruised in the wake of the surprise Trump victory in the United States presidential election last week, but none has been battered as badly as the Malaysian ringgit.

The US dollar has surged since the Nov 8 election and rose even more after US Federal Reserve chair Janet Yellen on Thursday flagged an interest rate rise "relatively soon".

Because the ringgit has fallen more against the greenback than the Singapore dollar has, the Malaysian currency is now attracting many buyers here.

Mr Arshad Hassam, operations manager at Sheen International Exchange in Collyer Quay, said business has been brisk as customers brave long queues to buy the ringgit.

"It has been pretty crazy. We even ran out of ringgit by mid-day last Wednesday," said Mr Arshad. "You can get RM3.06 for S$1 now. People haven't seen the exchange rate hit this level since last year, so they're hoping to take advantage of this. The school holidays are also starting, so most of them want to cash in on the cheap ringgit."

Overall, the US dollar index hit its highest level in more than 13 years yesterday ahead of a rate hike that could come as soon as next month.

The ringgit, as a result, depreciated further against the US dollar to about 4.4183, its weakest level since January. It has lost some 5 per cent since Mr Donald Trump won the election - the biggest slide among Asian currencies.

The Singdollar has been down by about 2.8 per cent to the greenback since Nov 9, at 1.4248 yesterday.

The Indonesian rupiah has shed 2.29 per cent against the US dollar in the same period, while China's yuan has softened 1.42 per cent and the Taiwan dollar by 1.93 per cent.

"There has been a global hunt for yield in the last six to nine months, which meant a lot of money was going into the emerging markets," said Bank of Singapore currency strategist Sim Moh Siong. "But there is now a reversal of this heavy foreign positioning."

Mr Sim said the ringgit's dismal performance was likely due to "fear of capital controls". This follows news that Malaysia's central bank is asking foreign banks for a written commitment to refrain from trading the ringgit in the offshore non-deliverable forwards market as it moves to protect the weakening currency.

Bank Negara Malaysia (BNM) yesterday confirmed it is intervening in markets to support the ringgit.

Mr Julian Wee, senior markets strategist for Asia at the National Australia Bank, said the ringgit's sustained weakness could be due to less effective intervention than regional counterparts.

He added: "The fundamentals are pointing in that direction (of further weakness in the ringgit) and there is not much the BNM can do to reverse that at this juncture."

The fall in oil prices would have had a significant impact on the ringgit as well, said Mr Wee, given that much of Malaysia's economy is dependent on the oil and gas industry. The nation is a major oil exporter.

A version of this article appeared in the print edition of The Straits Times on November 19, 2016, with the headline 'Ringgit most badly hit among Asian currencies'. Print Edition | Subscribe