Malaysian ringgit plunges in offshore markets; central bank locks spot in

A money changer counting ringgit at a shop in Putrajaya, outside Kuala Lumpur. PHOTO: REUTERS

SINGAPORE (REUTERS) - Malaysia's ringgit plunged to its weakest in more than 12 years in offshore markets on Friday (Nov 11) as investors dumped government bonds, while the spot rate barely moved as the central bank kept a tight grip on the onshore market.

Emerging Asian currencies and bonds lost ground as investors feared higher US interest rates once Donald Trump assumes the presidency would spark capital outflows from the region.

The ringgit's one-month non-deliverable forwards (NDFs) lost 3.7 per cent from the previous close to 4.5395 per dollar, its weakest since at least September 2004, according to Thomson Reuters data.

By contrast, the ringgit spot barely moved at 4.2725 per dollar with extremely thin liquidity. As a result, the dollar/ringgit's NDFs premium over the dollar/ringgit spot increased to 0.2695, the widest since at least April 2008, according to Reuters data.

Malaysia's central bank governor said Bank Negara Malaysia told banks in the country to take "temporary measures to calm the market".

"The situation now is result of speculative positioning... The central bank has responsibility to step in...," Governor Muhammad Ibrahim said at a news conference held to announce economic growth and current account data.

Traders in Kuala Lumpur said the authorities told big investors that they will allow spot trades linked to transactions in bonds on a case by case basis.

A senior Malaysian currency trader said the central bank told banks not to quote spot ringgit "so wide", which dried up liquidity in onshore currency market.

The ringgit's plunge came as Malaysia's government bond prices fell with the 10-year yield at 3.821 per cent, rising 0.038 percentage point to its highest since June 28.

The latest increase in the yield came on top of Thursday's 0.121 percentage point rise.

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