- Currency headed for biggest quarterly decline since 1997
- Global funds sold net 1.3 billion ringgit of shares last week
The ringgit fell for a fifth day as new allegations against a Malaysian state investment company damped demand for the nation’s assets, just as capital is flowing out of emerging markets ahead of a potential U.S. interest-rate increase.
The currency weakened 0.9 percent to 4.4242 a dollar in Kuala Lumpur, after earlier declining to 4.4250, the lowest level since January 1998, according to prices from local banks compiled by Bloomberg. It’s depreciated 15 percent since June 30, headed for the worst quarterly loss since 1997.
1Malaysia Development Bhd. is being probed by the U.S. Federal Bureau of Investigation over money laundering, while the U.S. Justice Department is looking into property purchases associated with Prime Minister Najib Razak’s stepson, according to reports this month from the Wall Street Journal and New York Times. The articles added to woes for Najib after an investigation by the Malaysian Anti-Corruption Commission found funds that appeared in his bank accounts were from political donations and not related to 1MDB.
“We have domestic issues that have yet to be resolved so that will continue to put pressure on the ringgit,” said Choong Yin Pheng, senior manager for bonds and economic research at Hong Leong Bank Bhd. in Kuala Lumpur. “There are concerns on the economic and political levels,” while data on Friday showing the U.S. economy expanded more than previously forecast boosted demand for the dollar, she said.
The central bank doesn’t target a specific level for the ringgit and the monetary authority wants to see the currency stabilize, Governor Zeti Akhtar Aziz told reporters in Kuala Lumpur on Monday.
Malaysia’s benchmark stock index retreated 0.4 percent and government bonds fell. The 10-year yield climbed eight basis points to 4.44 percent, according to prices from Bursa Malaysia.
MIDF Amanah Investment Bank Bhd. said in a report on Monday that global funds sold a net 1.3 billion ringgit ($294 million) of Malaysian shares last week. That took outflows in 2015 to 17.7 billion ringgit, surpassing the 6.9 billion ringgit for all of last year, the report said.