Malaysia’s Ringgit Trades at 3-Year Low as Recession Deepens

By David Yong, Bloomberg

Malaysia’s ringgit traded near the lowest in three years on concern the deepening global recession will cut demand for the nation’s exports and deter investors from buying the region’s assets.

The currency slumped for a sixth day, its longest losing streak since Oct. 10, after a private report showed a recession in U.S. manufacturing persisted for a 13th straight month in February, damping the outlook for Asian exports. The MSCI Asia Pacific Index of regional stocks fell after the Standard & Poor’s 500 Index of U.S. equities yesterday tumbled to the lowest close since October 1996.

“As long as Western consumers continue to keep their wallets shut, Asian exporters will continue to suffer,” said Khoon Goh, a senior markets economist at ANZ National Financial Group in Wellington. “Asia ex-Japan will continue to fall in the current risk-averse environment.”

The ringgit fell 0.1 percent to 3.7340 per dollar as of 8:13 a.m. in Kuala Lumpur, extending this year’s decline to 7.5 percent, according to data compiled by Bloomberg. It earlier reached 3.7350, the weakest since February 2006.

A slump in exports may tilt Malaysia’s economy into a contraction this year, the first since the Asian financial crisis in 1998, Bank Negara Malaysia said on Feb. 24. The central bank has cut its overnight policy rate to record-low 2 percent from 3.5 percent in three meetings since November.

Non-deliverable forwards signal traders are betting the ringgit will weaken 0.9 percent from today’s spot rate to 3.7670 in three months, compared with expectations for 3.6935 a week ago. Forwards are contracts in which assets are bought and sold at current prices for delivery at a future specified date.