SINGAPORE - Malaysia’s currency fell to its weakest level against the U.S. dollar since the Asian financial crisis Monday, as political pressure builds against the country’s prime minister and Greece’s possible exit from the eurozone rattles investors.
The ringgit is Asia’s worst-performing currency this year, down 8.2% against the dollar. On Monday, one U.S. dollar bought 3.808 ringgit, compared with 3.777 before the weekend, its weakest level in more than 16 years. The 3.800 level is psychologically significant for traders, as it marks the government-imposed peg against the dollar during the 1998 financial crisis. That peg was lifted in 2005.
“The main driver at the open was the heightened political uncertainty surrounding Najib’s finances,” said Stephen Innes, senior trader at foreign exchange brokerage Oanda, in Singapore. “It’s another negative the market was not expecting,” he said.
SINGAPORE—Malaysia’s currency fell to its weakest level against the U.S. dollar since the Asian financial crisis Monday, as political pressure builds against the country’s prime minister and Greece’s possible exit from the eurozone rattles investors.
The ringgit is Asia’s worst-performing currency this year, down 8.2% against the dollar. On Monday, one U.S. dollar bought 3.808 ringgit, compared with 3.777 before the weekend, its weakest level in more than 16 years. The 3.800 level is psychologically significant for traders, as it marks the government-imposed peg against the dollar during the 1998 financial crisis. That peg was lifted in 2005.
“The main driver at the open was the heightened political uncertainty surrounding Najib’s finances,” said Stephen Innes, senior trader at foreign exchange brokerage Oanda, in Singapore. “It’s another negative the market was not expecting,” he said.
Malaysia’s stock market was down 1.3%, outpacing losses in other Southeast Asian indexes on Monday, and is down 2.8% in the year-to-date.
Malaysian markets have been under pressure this year as the oil-exporting nation is hit by falling commodity prices, which have nearly halved since July last year. While Fitch Ratings’ revised outlook on its investment-grade rating to stable from negative last week eased some concerns about Malaysia’s fiscal health, Greece’s decision over the weekend to reject bailout terms from its creditors has introduced more uncertainty into an already jittery market.
Preliminary results of Greece’s referendum Sunday show a victory for the “no” campaign, which rejected austerity policies set out by the eurozone and the International Monetary Fund. Creditors have said the outcome imperils future compromise and puts Greece closer to leaving the currency bloc.
Maybank’s head of foreign exchange research Saktiandi Supaat said the ringgit’s weakness is partly thanks to the perceived threat of contagion from Greece, but “it’s a confluence of events coming at the same time” that have put strain on the currency. “I wouldn’t solely put it on political uncertainty but also on oil price as well,” he said.
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