August 14, 2015 – Malaysia’s ringgit currency suffered one of its worst one-day declines today, falling to a fresh 17-year low in a protracted slide blamed on concerns over low oil prices and political uncertainty.
The ringgit has declined more than 25 percent over the past year and it weakened another 1.74 percent to 4.0805 to the US dollar by the close on Friday.
It had lost nearly three percent of its value earlier in the day – its biggest drops in almost 20 years – after oil prices tumbled to fresh six-year lows. Malaysia is an oil exporter and there is rising concern that slumping crude prices will curb economic growth.
Investor sentiment in Malaysia has also been hit by political turmoil stemming from corruption allegations involving Prime Minister Najib Razak, and China’s surprise devaluation of the yuan this week.
Asia’s worst-performing currency over the past year, the ringgit slid through the key 4.0 barrier on Wednesday for the first time since 1998, when a financial crisis rocked Asia. That crisis resulted in Malaysia pegging the ringgit to the dollar at a rate of 3.80.
The peg was lifted nearly seven years later, and central bank governor Zeti Akhtar Aziz said that there were currently no plans to revive it.
Energy products are Malaysia’s main source of trade revenue, and its export income has declined steadily since global oil prices started falling last year.
yesterday, the government announced Southeast Asia’s third-largest economy grew 4.9 percent in the second quarter, down from 6.5 percent in the same period of 2014 and its slowest rate in nearly two years.
Najib is fighting to fend off corruption suspicions related to debt-ridden state investment firm 1Malaysia Development Berhad (1MDB).
A series of investigative media reports have alleged that hundreds of millions of dollars have gone missing from deals involving 1MDB, which Najib launched six years ago and remains close to.
The Wall Street Journal last month revealed that Malaysian investigators had found nearly US$700 million money had been deposited into Najib’s personal bank accounts. The government has since called them “donations” from unidentified overseas sources, but no details have been provided.
Najib, who denies wrongdoing, appears to have asserted control with a cabinet shuffling two weeks ago, but analysts and traders say the uncertainty is not helping sentiment.
Foreign investors have pulled US$3 billion out of Malaysia this year.