Ringgit falls to 3.07 to Singdollar
The Malaysian ringgit continued its freefall, sinking to a new low of 3.0771 against the Singapore dollar in early trading yesterday, battered by a drop in oil prices, a weakened global economy and uncertain domestic politics.
It recovered from the record low later in the day, trading around 3.0574 to the Singdollar.
The Malaysian currency also sank to a new low against the US dollar. It was down 1.1 per cent to 4.3770 per US dollar at 8.13am in Kuala Lumpur, the lowest level since January 1998.
The benchmark Brent crude oil futures was trading 0.8 per cent lower at US$47.24 a barrel.
The Malaysian currency has lost over 19 per cent in the year-to-date, making it the worst performing emerging Asian currency, according to media reports yesterday.
Economists in a Reuters poll were unanimous in their forecasts for Bank Negara Malaysia to keep its overnight policy rate unchanged at 3.25 per cent, as risks to Malaysia's economic growth remain.
They do not see the central bank resorting to using interest rates as a policy tool, saying that the most likely policy action to stabilise capital outflows is to repatriate government-linked firms' overseas investments and Forex earnings.
WAIT AND SEE
But Bank Negara would likely adopt a wait-and-see approach until the US Federal Reserves decides if it would raise rates.
"There's no point to use up their bullets now. It would be more prudent to store those measures in their arsenal first," said Mr Michael Wan, economist at Credit Suisse.
Malaysia has been gripped by political tensions which escalated in early July after a Wall Street Journal report on troubled state fund 1Malaysia Development Berhad (1MDB) reported that close to US$700 million (S$990 million) had been deposited in an account held by Prime Minister Najib Razak.
Mr Najib, who also chairs 1MDB, has denied any wrongdoing, but the scandal has not died down.
Last month, an anti-government rally drew tens of thousands of protesters calling for the prime minister's resignation to the streets of Kuala Lumpur.