Ringgit continues to slide, hits five-year low

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KUALA LUMPUR (Dec 8): The ringgit has weakened further against the US dollar, reaching its lowest point since September 2009, on the strengthening of the dollar and on concerns over the impact of falling crude oil prices on the Malaysian government’s revenue.

At 4pm, the ringgit was traded at RM3.496 per dollar versus its strongest year-to-date exchange rate of RM3.1415 per dollar on Aug 28, this year.

The US dollar rose after US jobs market bolstered the case for the Federal Reserve to raise interest rates, Bloomberg reported today.

RHB Research economist Peck Book Soon told theedgemarkets.com that falling crude oil prices globally had contributed to the weaker ringgit.

"People are concerned the fall in oil prices could impact Malaysia's fiscal position, current account surplus and the gross domestic product (GDP) growth," said Peck.

"Investors are selling with this concern and repatriating their money out from Malaysia," he said, hence the ringgit's continuing down slide.

In the near term, Peck said ringgit may continue to be under pressure until crude oil prices stabilised.

"Malaysian central bank is likely to come in to smoothen the depreciation of the ringgit against the dollar rather than support the ringgit," he said.

Bloomberg's report said Brent crude has extended its decline from the lowest in almost five years, reinforcing concerns about declining revenue for Malaysia, a net oil exporter.

The Bloomberg Dollar Spot Index rose the most in five weeks on Dec 5 after a report showed US payrolls increased by 321,000 last month, the most in almost three years and beating the most optimistic forecast in a Bloomberg survey.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose 22 basis points, or 0.22 percentage point, to 8.99%, the highest since November 2013, the report said.

It also noted that Malaysia's foreign reserves had dropped 0.7% to US$125.7 billion as at Nov 28 from two weeks earlier, the lowest level since April 2011, according to a Dec 5 report from the central bank.