Ringgit tumbles to weakest since 3.8 dollar peg scrapped in 2005

[KUALA LUMPUR] Malaysia's ringgit tumbled to the weakest level since a dollar peg was scrapped in 2005 as the heightened risk that Greece will exit the euro damped demand for emerging- market assets.

The currency dropped 0.7 per cent to 3.8045 versus the greenback as of 8.21am in Kuala Lumpur, data compiled by Bloomberg show. The currency was fixed at 3.8000 per dollar in 1998 during the Asian financial crisis after it slumped 35 per cent the previous year amid a devaluation in the Thai baht.

Malaysia's currency is Asia's worst-performing exchange rate this year as a political debate surrounding state investment company 1Malaysia Development Bhd that has engulfed Prime Minister Najib Razak compounded its woes. A 48 per cent drop in Brent crude prices from last year's peak prompted Fitch Ratings to warn in March that the net oil exporter faced the risk of a downgrade because of deteriorating finances.

Fitch refrained from doing just that on June 30 following a review and instead raised the outlook on the A- rating, the fourth-lowest investment grade, to stable from negative, resulting in a short-lived rally in the ringgit.

BLOOMBERG