KUALA LUMPUR (BLOOMBERG) - The ringgit posted its biggest weekly decline since a 1998 dollar peg, and bonds plunged as a report that a Malaysian state investment company is being investigated in the United States exacerbated losses from a slowdown in China and tumbling commodity prices.

The currency weakened to hit a low of 3.0808 on Friday against the Singdollar, slipping 0.26 per cent from its previous close of 3.0431.

It ended RM4.3863 against the greenback, declining 4.1 per cent for the week. 

It had dropped beyond RM4.39 against the greenback during the day for the first time since the Asian financial crisis prompted Malaysia's central bank to implement capital controls.

1Malaysia Development Berhad (1MDB) is being probed by the Federal Bureau of Investigation (FBI) over money laundering, while the US Justice Department is looking into property purchases associated with Prime Minister Najib Razak's stepson, according to reports from the Wall Street Journal and New York Times over the past week.

"There are Malaysia-specific factors that make the ringgit such an underperformer," said Tim Condon, head of Asia research at ING Groep NV in Singapore. "I don't think it's a surprise that in a risk-off environment it retains that status today" amid concern about a deepening slowdown in China, he said.

The FTSE Bursa Malaysia KLCI Index of shares was set for the worst week in more than a month.

Mr Najib, who chairs the 1MDB advisory board, is already facing pressure by opposition members to step down. An investigation by the Malaysian Anti-Corruption Commission revealed about US$700 million that found its way into his bank accounts was from political donations and not related to 1MDB - the accounts were closed in 2013.