Ringgit, rupiah slide as weak China data hits Asian currencies

Malaysia Ringgit slides as China's economy slows further.
Malaysia Ringgit slides as China's economy slows further.PHOTO: REUTERS

KUALA LUMPUR (BLOOMBERG, REUTERS) - Malaysia's ringgit and Indonesia's rupiah led the slide in Asian currencies as a measure of factory output in China added to signs Asia's largest economy is slowing, spurring demand for the relative safety of the US dollar.

Emerging-market assets have been under pressure since the Federal Reserve cited China concerns as a reason for refraining from raising interest rates last week. A measure of Chinese manufacturing fell to six-year low, according to a preliminary Purchasing Managers' Index released on Wednesday (Sept 23). That further dimmed the outlook for Malaysia's biggest trading partner, just as new probes into state investment company 1Malaysia Development Bhd. and the prime minister are once again hurting the ringgit.

The rupiah fell 1 per cent to 14,645 per US dollar, a new 17-year low for the currency. It is down 15 per cent this year in Asia's worst performance after Malaysia's ringgit.

The ringgit sank 1.2 per cent to 4.3490 per US dollar as of 10:53 am in Kuala Lumpur, taking its three-day loss to 3.4 per cent, according to prices from local banks compiled by Bloomberg.

The ringgit was trading 3.0578 to the Singapore dollar, which itself has weakened to the US dollar, as of 11:32 am, off recent lows below the 3.07 level.

The ringgit may test its all-time low of 4.8850 to the US dollar seen in January 1998 due to slowing global growth, low commodity prices and "idiosyncratic political risks," Win Thin, global head of emerging market currency strategy at Brown Brothers Harriman & Co. in New York, wrote in a research note on Wednesday. It has fallen more than other regional currency this year amid sliding energy prices that are cutting revenue for Asia's only major oil exporter.

The US. Justice Department probe is focusing on U.S. properties that were purchased by shell companies belonging to Prime Minister Najib Razak's stepson and funds that appeared in the premier's personal bank accounts, according to the New York Times. Mr Najib's office didn't respond to a phone call and a text message seeking comment on the report on Tuesday. The Wall Street Journal said at the weekend that the US Federal Bureau of Investigation also started looking into allegations of money laundering by 1MDB.

The outlook for Malaysia has also been negatively affected by its level of short-term debt, which is relatively high compared with other Asian economies, said Royal Bank of Canada's Trinh. The country's debt is equivalent to 54.2 per cent of gross domestic product, a proportion only exceeded by Sri Lanka and Pakistan among 13 emerging markets tracked by Bloomberg.

Five-year credit-default swaps protecting Malaysian sovereign bonds rose 19 basis points in New York on Tuesday to 207, the highest since October 2011, CMA prices show. The 10-year government note yield advanced four basis points to 4.27 per cent, climbing for a third day, according to prices from Bursa Malaysia.

"Most measures of risk appetite are suggesting elevated risk aversion," said Sue Trinh, head of Asia foreign-exchange strategy at Royal Bank of Canada in Hong Kong. "There's the ongoing political scandal that isn't resolving itself in a particularly timely manner, so all these factors are weighing against the ringgit."