Ringgit Falls Most in Two Weeks as Stocks Drop on Growth Concern

  • FBI said to be probing money-laundering claims related to 1MDB
  • Futures traders pare bets for Fed rate increase in 2015

Malaysia’s ringgit fell the most in two weeks as Asian shares tracked Friday’s U.S. losses after the Federal Reserve’s decision to keep interest rates unchanged reignited concern that global growth is slowing.

Malaysia’s benchmark stock index also dropped on Monday as odds of a Fed rate increase at this year’s two remaining meetings receded after Chair Janet Yellen noted China’s slowing economy and financial market turmoil when she left borrowing costs near zero. The ringgit is already Asia’s worst-performing currency in 2015 as falling Brent crude prices weigh on the oil exporter’s earnings.

The currency closed down 1.4 percent at 4.2635 a dollar in Kuala Lumpur, according to prices from local banks compiled by Bloomberg. It rallied 2.7 percent last week, halting the longest run of weekly losses since 1971, as the Fed’s rate decision brought relief to emerging markets before the growth concern set in.

“The Fed said that it would wait because of concerns of external risks and it made the market think harder about the global growth environment,” said Sim Moh Siong, a currency strategist at Bank of Singapore Ltd. “Because of the uncertainty as to the Fed’s future response and the possibility it may be behind the curve, the equity market sold off and generally risk-off is negative for emerging-market currencies.”

FBI Probe

The FTSE Bursa Malaysia KLCI Index of shares fell 1.8 percent, after a 4.1 percent advance last week. The ringgit dropped to 4.3798 a dollar on Sept. 10, the lowest level in more than 17 years.

While Fed funds futures pared bets for an October rate rise to 20 percent, central bank policy makers, including San Francisco Fed President John Williams and St. Louis Fed President James Bullard, said over the weekend that they still expect an increase in 2015. Odds for a move in December are 47 percent.

The ringgit has fallen 24 percent in the past year amid a halving in oil prices. A probe into state investment company 1Malaysia Development Bhd. that’s culminated in a political scandal involving Prime Minister Najib Razak has also sapped demand for Malaysian assets. The Federal Bureau of Investigation is probing allegations of money-laundering related to 1MDB, the Wall Street Journal reported on Sunday, citing people familiar with the matter.

The Malaysian currency will recover and reflect the nation’s fundamentals when China’s economy stabilizes and domestic issues such as those relating to 1Malaysia Development Bhd., a state investment company, are resolved, central bank Governor Zeti Akhtar Aziz said in Kuala Lumpur on Monday. Bank Negara Malaysia only intervenes to smooth volatility in the ringgit, Zeti said.

Overseas investors cut holdings of Malaysia’s sovereign bonds to a five-month low in August. The 10-year yield rose two basis points to 4.14 percent after declining six basis points last week, according to prices from Bursa Malaysia.

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