Ringgit sees biggest weekly drop on US probe

The ringgit posted its biggest weekly decline since a 1998 dollar peg.
The ringgit posted its biggest weekly decline since a 1998 dollar peg.PHOTO: REUTERS

KUALA LUMPUR • 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 yesterday 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.

Former premier Mahathir Mohamad imposed a fixed exchange rate of RM3.8 a US dollar in 1998 after the currency plunged 35 per cent the previous year in the wake of a devaluation in the Thai baht. The peg stood until July 2005.

The currency has declined 26 per cent in the past 12 months, Asia's worst performance, as Brent crude prices that have halved in that time weighed on earnings for the region's only major net oil exporter.

China, Malaysia's biggest trading partner, is heading for its slowest annual growth in more than two decades and markets are focused on the impact that may have on the global economy.

Federal Reserve chair Janet Yellen indicated on Thursday that she supports a US interest-rate increase this year.

1MDB came under the spotlight last year due to its rising debt. An investigation by the Malaysian Anti-Corruption Commission revealed about US$700 million (S$997 million) that found its way into Datuk Seri Najib's bank accounts was from political donations and not related to 1MDB.

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A version of this article appeared in the print edition of The Straits Times on September 26, 2015, with the headline 'Ringgit sees biggest weekly drop on US probe'. Print Edition | Subscribe