Hung parliament weighs on Malaysia’s ringgit

THE Malaysian ringgit is at risk of giving up even more of this month’s gains if party leaders cannot form a stable government.

The currency fell as much as 0.7 per cent to almost RM4.59 per US dollar on Monday (Nov 21), after the weekend’s election resulted in a hung parliament. Technicals also suggest a return to around the RM4.75 level cannot be ruled out. A key Fibonacci level for US dollar-ringgit remains intact, which indicates the pair’s broader rally is still in place, while momentum indicators suggest that the 4 per cent rise in the Malaysian currency in November may be excessive.

“Hung parliament will weigh on the ringgit today, until there is greater clarity on who will form the next government,” said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group. “In addition, the fall in global oil prices will be another factor that will push the ringgit lower in the near term.” 

A weak ringgit may add to the challenges facing the new administration, as it drives up import costs and exacerbates price pressures. Like all its emerging Asian peers, Malaysia’s currency has also been hurt by China’s slowing growth and a hawkish Federal Reserve. BLOOMBERG