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Ringgit headed for worst weekly since 1998 as US probes 1MDB
[KUALA LUMPUR] Malaysia's ringgit headed for its biggest weekly decline since a US dollar peg was imposed in 1998 as investigations into a state investment company spread to the US, exacerbating losses driven by a slowdown in China and tumbling commodity prices.
The currency weakened beyond 4.38 against the greenback on Friday (Sept 25) for the first time since the Asian financial crisis prompted Malaysia's central bank to implement capital controls. 1Malaysia Development is being probed by the US Federal Bureau of InvestigationÂ over money laundering, while the US Justice Department is looking into property purchases associated with a family member of Prime Minister Najib Razak."There are Malaysia-specific factors that make the ringgit such an underperformer," saidÂ Tim Condon, head of Asia research at ING Groep NV in Singapore. "I don't think it's a surprise that in a risk-off environment it retains that status today" amid concern about a deepening slowdown in China, he said.
The ringgit dropped 0.9 per cent to 4.3870 per US dollar as of 9:47 am in Kuala Lumpur and is down 4.2 per cent for the week, according to prices from local banks compiled by Bloomberg.
It fell sharply against the Singapore dollar on Friday, trading at 3.0789 to the Singdollar, after hitting a low of 3.0808 earluer, from Thursday's close of 3.0431.
The FTSE Bursa Malaysia KLCI Index of shares was set for the worst week in more than a month.
Mr Najib, who chairs the 1MDB advisory board, is already facing pressure by opposition members to step down. An investigation by the Malaysian Anti-Corruption Commission revealed about US$700 million that found its way into his bank accounts was from political donations and not related to 1MDB - the accounts were closed in 2013.