Ringgit hits the lowest currency since 1998, worst performer after yen, reports Bloomberg

KUALA LUMPUR, Oct 19 ― The Malaysian ringgit tumbled by 0.3 per cent to 4.735 per dollar, recorded as the weakest since 1998.

Bloomberg reported that the currency dropped to the lowest ever since the Asian Financial Crisis and is considered as the worst performer in Asia after yen, this year.

The agency further added that the currency’s declining digit was influenced by the rise in dollar and increasing rate variation with the United States.

Similarly, the high gains in dollars was also driven by the demand for the safe havens due to the conflict between Israel and Hamas war, leading to the latest drop in the local currency.

While in August, the Southeast Asian country noted a six months straight export declination, which was partly due to the slowdown in China, which is its major trading partner.

Bloomberg further reported as for the September export figures, it will be due at noon local time on Thursday.

Moreover, the decision by Bank Negara Malaysia to halt the interest rates since July has further injured the value of the currency as hawkish comments are made by central banks around the world.

As a result, the local overnight policy rate is now historically discounted in relation to the Fed Funds Rate upper bound.

Mizuho Bank Ltd in Singapore Economics and Strategy Head, Vishnu Varathan opined that Ringgit underperformance has been due to, “real rate spreads that could turn a lot more unfavourable, especially as the subsidy rollback hits inflation and reveals softer real policy rates.”

Reiterating further on the condition, Varathan said that the policymakers were torn in choosing between the economic headwinds from higher rates or the risk of not responding and putting the macro and ringgit’s stability at risk.