The ringgit lost as much as 0.4 percent to 3.2720 per dollar, its weakest since June 2010, as investors added to their bearish bets on the currency.
"Malaysia is becoming more vulnerable to Fed tapering since they have high foreign bond positioning and the current account surplus is dwindling quickly," said Sean Yokota, head of Asia strategy at Scandinavian bank SEB in Singapore.
The Malaysian currency is seen weakening to 3.3000 in the next six months, Yokota said.
As of May, foreigners held nearly 50 percent of outstanding government bonds, although central bank data showed foreign holdings slipped to 137.88 billion ringgit ($42.3 billion) from 144.5 billion ringgit in May.
Slowing economic growth, the near disappearance of the country's usually large trade surplus and the government's hesitance to implement much-needed reforms have prompted foreign investors to reconsider their exposure to the Southeast Asian country.
Some analysts said the ringgit does not have a significant technical support until 3.3345, the 50 percent Fibonacci retracement of its appreciation between March 2009 and July 2011.
The dollar rose after a stronger-than-expected 0.5 percent rise in U.S. core retail sales, the biggest growth since December.
"Dollar/Asia is still very biddish. This situation can sustain until the next FOMC," said a senior Malaysian bank trader in Kuala Lumpur, referring to the Federal Open Market Committee's meeting on Sept. 17-18.
"I will buy dollar/ringgit on a dip near 3.25," the trader added.
Investors remained wary of possible intervention by the central bank to defend the currency, with market talk of agent banks' dollar selling around the ringgit's session low, traders said.
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