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Malaysia Reserves Set to Drop Below $100 Billion

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Malaysia’s foreign-exchange reserves are set to drop below $100 billion just when the nation most needs a buffer against any collapse in investor confidence.

It doesn’t help that the holdings were last below that mark during the 2008 global credit crunch and the 1997-98 Asian financial crisis. The decline reflects intervention to support the ringgit, which breached its 1998 peg level of 3.8 a dollar this month and sank to a 16-year low. Default risk for Malaysia is about 40 basis points above that of Thailand and the Philippines as dollar bond prices fall for both a troubled state investment company and the country’s state oil producer.