Ringgit falls to fresh 17-year low, unmoved by surprise exports rebound

[KUALA LUMPUR] A surprise rebound in Malaysia's exports failed to revive the ringgit, which fell to a fresh 17-year low on prospects for a September increase in US interest rates.

The ringgit is Asia's worst performer this year, having been battered by sliding commodities prices and a political scandal involving Prime Minister Najib Razak. Most regional currencies weakened on Wednesday after comments by a Federal Reserve official fueled speculation US borrowing costs will be raised next month. Malaysia's exports rose 5 per cent from a year earlier in June, the most in 12 months."The ringgit isn't reacting to the better export numbers because the watch is not on trade," said Wong Chee Seng, a currency strategist at AmBank Group in Kuala Lumpur. "The watch is on foreign-exchange reserves, which are expected to fall further," he said, referring to this year's 13 per cent drop in holdings to US$100.5 billion in mid-July.

The currency was down 0.6 per cent at 3.8765 per US dollar as of 1.12 pm in Kuala Lumpur, prices from local banks compiled by Bloomberg show. It fell to 3.8787 before the trade numbers, the lowest since September 1998 when it reached 3.9340.

The ringgit, which has lost 9.8 per cent in 2015, extended this week's losses in early trading after Fed Bank of Atlanta chief Dennis Lockhart said in a Wall Street Journal report that he would only endorse putting off a rate increase next month should there be a significant deterioration in US data.

Malaysia's overseas shipments beat the median estimate in a Bloomberg survey for a 2.2 per cent drop. The June trade surplus came in at RM7.98 billion (S$2.85 billion), above the RM5.5 billion predicted and the highest in five months.

BLOOMBERG