SINGAPORE • The ringgit yesterday plumbed lows last seen during the Asian financial crisis 17 years ago, after news that Malaysia's foreign exchange reserves fell below the US$100 billion (S$138 billion) threshold, raising doubts over the currency's ability to withstand pressure from political uncertainty and slower growth.
The ringgit dropped to 3.9300 per US dollar, compared with the previous close of 3.9220. It was the weakest level since Sept 2, 1998, the day before the government pegged it at 3.8000 per dollar to put a floor under the currency during the Asian financial crisis. Malaysia lifted the peg in 2005.
Malaysia's international reserves fell to US$96.7 billion as of July 31 from US$100.5 billion on July 15, central bank data showed last Friday.
Bank Negara Malaysia (BNM) has been selling dollars and buying ringgit since June in an attempt to stem the ringgit's slide as Prime Minister Najib Razak became engulfed in a scandal over indebted state fund 1Malaysia Development Berhad.
The ringgit's weakness has seen foreign funds dump US$3 billion of the nation's shares this year.
Yesterday, Kuala Lumpur stocks fell 1.7 per cent to their lowest close since March 2013. The benchmark KLCI Index has lost 11 per cent from its April 21 peak.
"BNM is between a rock and a hard place," said Dr Andy Ji, Asian currency strategist at Commonwealth Bank of Australia in Singapore. "If it lets the ringgit fall, outflows will accelerate. To intervene, it will use up its FX (forex) reserves. So, in the end, it needs to implement some capital controls."
Despite the intervention, the ringgit is Asia's worst-performing currency this year, having lost around 11 per cent against the dollar.
It was earlier undermined by a slide in global commodity prices that had hurt export earnings and the government's fiscal position.
Malaysia releases its second-quarter GDP data on Thursday, amid rising concern over the outlook as a report yesterday showed industrial production in June rose 4.3 per cent from a year earlier, slightly short of market expectations. REUTERS