The Malaysian ringgit has reportedly tumbled by 0.3 per cent to 4.735 per dollar, recorded as the weakest since 1998.
The agency further added that the currency’s declining digit was influenced by the rise in the dollar and increasing rate variation with the United States.
Similarly, the high gains in dollars were also driven by the demand for safe havens due to the conflict between Israel and Hamas, leading to the latest drop in the local currency.
In August, Malaysia noted a six-month straight export decline, which was partly due to the slowdown in China, which is its major trading partner.
Moreover, it said the decision by Bank Negara Malaysia to halt the interest rates since July has further injured the value of the currency as hawkish comments are made by central banks around the world.
As a result, the local overnight policy rate is now historically discounted in relation to the US federal funds rate ceiling.
Mizuho Bank Ltd in Singapore Economics and Strategy Head, Vishnu Varathan reportedly commented that the ringgit underperformance has been due to “real rate spreads that could turn a lot more unfavourable, especially as the subsidy rollback hits inflation and reveals softer real policy rates.”
Reiterating further on the condition, Varathan said that the policymakers were torn in choosing between the economic headwinds from higher rates or the risk of not responding and putting the macro and ringgit’s stability at risk.
Earlier this month, Prime Minister Datuk Seri Anwar Ibrahim, who is also finance minister, said that the ringgit’s depreciation, however, is not as severe as the value of the Japanese yen or Thailand’s baht that is also experiencing depreciation.
In May after ringgit reached then a six-month low, Bank Negara Malaysia said the sharp depreciation of the ringgit versus the US dollar was in line with a larger decline of regional currencies against the greenback.