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[KUALA LUMPUR] Malaysia's ringgit dropped to a new 1998 low and stocks fell as sentiment continues to sour for emerging- market assets amid slowing Chinese growth and prospects for a US interest-rate increase.
The ringgit came under renewed pressure on Monday from a decline in Brent crude and the narrowing in the oil-exporter's trade surplus. Data on Friday showed a mixed picture of the US jobs market, which is key for determining when the Federal Reserve will tighten policy. While the unemployment rate fell to a seven-year low, non-farm payrolls numbers missed estimates. Higher US borrowing costs may spur more capital outflows from developing nations, just as China's slowing economy curbs risk appetite.
"The ringgit is lower because of the stronger dollar following Friday's US non-farm payrolls print alongside lower oil prices," said Khoon Goh, a Singapore-based strategist at Australia & New Zealand Banking Group Ltd. "Malaysia's lower- than-expected trade balance may also be raising some concerns over the current-account position."
The ringgit weakened 1.7 per cent to 4.3300 a dollar in Kuala Lumpur, according to prices from local banks compiled by Bloomberg. It fell to 4.3405 earlier, the lowest level since January 1998 when it reached a record 4.8850. The FTSE Bursa Malaysia KLCI index of shares lost 0.4 per cent.
The currency dropped for an 11th straight week through Sept 4, the longest stretch of losses since 1993. The trade surplus shrank to RM2.38 billion (US$550 million) in July from a year earlier, official data showed on Friday. That was less than June's RM7.98 billion and the RM6.3 billion forecast in a Bloomberg survey.
A 0.2 per cent increase in the nation's foreign-exchange reserves to US$94.7 billion in the last two weeks of August failed to bring any reprieve for the ringgit. The holdings were at US$94.5 billion in the previous two weeks, the lowest level since 2009, and a signal the central bank may have been intervening to stem a slide in this year's worst-performing Asian currency.
The falling reserves are a constraint on how much the authorities can intervene to support the ringgit, said Sim Moh Siong, a foreign-exchange strategist at Bank of Singapore Ltd in the city-state.
"China's growth fears and Fed rate lift-off concerns are to blame for emerging currencies' weakness." Malaysia's central bank meets at the end of this week and 18 of 19 economists surveyed by Bloomberg predict no change in the benchmark interest rate from 3.25 per cent. One expects a 25 basis-point increase.
While US non-farm payrolls climbed 173,000 in August and were less than the 217,000 forecast in a Bloomberg survey, the previous month's figure was revised higher to 245,000. Futures still aren't giving an overwhelming prediction for the first Fed rate hike. The odds for a move at the September meeting are 32 per cent, 44 per cent in October and 61 per cent for December.
Malaysia government bonds due October 2017 declined, with the yield rising two basis points to 3.36 percent, according to prices from Bursa Malaysia. The 10-year yield climbed three basis point to 4.24 percent.