Malaysia’s ringgit slides towards new all-time low on lacklustre growth

The Malaysian ringgit is about 2 per cent away from reaching 4.8850 per US dollar, a level last seen in 1998 when the Asian financial crisis ravaged the region’s currencies. The local currency has dropped nearly 4 per cent this year.

“There is a risk that the ringgit will reach a new all-time low,” said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group. “Exports are not recovering unlike those in other Asian economies and economic growth may remain lacklustre.”

Traders will keep an eye on inflation data this week, which will offer clues on Bank Negara Malaysia’s ability to maintain interest rates and support the currency should the US dollar’s strength prevail as investors pare bets on Federal Reserve rate cuts.

The ringgit hit 4.7958 against the US dollar in October, the weakest since 1998. A decline beyond this level may bring the 4.82 to 4.85 ringgit-per-dollar range into focus, according to a technical analysis.

“If the dollar continues to head higher, either due to further resistance in the Fed cut cycle or a bigger risk-off event, then the risk for the ringgit will persist,” said Christopher Wong, a currency strategist at Oversea-Chinese Banking Corp. in Singapore.

To be sure, most analysts are forecasting a stronger ringgit by the end of the year as Malaysia’s economic growth gains momentum. OCBC sees the currency recovering to 4.6 per dollar, while ANZ predicts a level of 4.45.

The central bank is also expected to keep its key interest rate unchanged through 2024, even as the Fed eases its monetary policy.

“This would eventually narrow the yield differentials between US and Malaysia, providing support for the currency,” Wong said. “There’s room for the ringgit to recover some lost ground.”