Malaysian money changers warned against hoarding foreign currencies to profit from slumping ringgit

Malaysian ringgit banknotes. The ringgit is Asia's worst-performing this year, hit by slumping crude oil prices as well as allegations against Prime Minister Najib Razak and state investment firm 1Malaysia Development Berhad (1MDB).
Malaysian ringgit banknotes. The ringgit is Asia's worst-performing this year, hit by slumping crude oil prices as well as allegations against Prime Minister Najib Razak and state investment firm 1Malaysia Development Berhad (1MDB).PHOTO: AFP

SINGAPORE - Malaysian money changers have been warned not to hoard foreign currencies to profit from the slumping ringgit, the Malaysian Insider news site reported on Wednesday.

The warning came from the head of the Malaysian Association of Money Services Businesses (MAMSB) who said stockpiling to profit from the weak ringgit could pose risks in a volatile market.

"It is not a standard practice or a norm," Mr Ramasamy Veeran told The Insider. "The risk would be exchange rate risk whereby if there are adverse changes in currency exchange rates, the money changer could suffer a loss if they are stockpiling foreign currencies."

The ringgit is Asia's worst-performing this year, hit by slumping crude oil prices as well as allegations against Prime Minister Najib Razak and state investment firm 1Malaysia Development Berhad (1MDB).

Mr Najib is fighting allegations that he received billions of ringgit from entities linked to 1MDB in his personal bank accounts.

Additionally, 1MDB, which has piled up debt to the tune of RM42 billion, has placed Malaysia sovereign credit rating at risk.

In the latest development, the Singapore Police Force confirmed Wednesday that it has frozen two bank accounts to help with an investigation into 1MDB, which is being probed by authorities in Malaysia for financial mismanagement and graft.

Mr Ramasamy said MAMSB has yet to receive any complaints about money changers withholding foreign currencies but warned such actions could impact on various sectors of the economy.

"Stockpiling and withholding of foreign currencies can create an artificial shortage of foreign currency which can impact areas, such as tourism," he was quoted as saying.

He added that MAMSB can act against money changers who do so and that public can lodge complaints with the association or with Bank Negara Malaysia.

The ringgit was trading at RM 2.7778 to S$1 at noon on Wednesday having recovered from a low of RM 2.81 to S$1 earlier in July.