Malaysian ringgit hits fresh 42-month low on sales
Malaysian ringgit hits fresh 42-month low on sales
KUALA LUMPUR (Reuter): The Malaysian ringgit extended its freefall against the dollar yesterday, hitting a 42-month low on sales from offshore investors, and most foreign exchange dealers expect further losses.
At 0730 GMT, the ringgit was languishing at 2.7337/47 to the dollar -- its weakest level in 42 months.
Though dealers generally feel the ringgit should find support soon, some have not ruled out a slide to 2.80, a level last seen in July 1991.
"It's difficult to say at this point where the ringgit is heading, but I don't think we have seen the bottom yet," a dealer with a Malaysian bank said.
"Obviously 2.80 is the next psychological level."
The currency has remained under selling pressure since plunging two percent late on Friday shortly after Prime Minister Mahathir Mohamad said he was happy with the ringgit's level, dealers said.
They said Mahathir's remarks were taken to mean that the central bank, Bank Negara Malaysia, would allow the ringgit to find its own level and would not intervene to stop the local unit from being sold.
"This was the last thing that the ringgit needed, given (that) regional currency woes (were) still pretty much unresolved, thus opening the way to more ringgit downside," research house I.D.E.A. said in a Monday morning commentary.
A dealer with a European bank in Singapore said: "Buying interest in dollar/Malay among offshore parties is still very strong, especially U.S. funds and Hong Kong parties."
"I think offshore parties are still short ringgit and long U.S. dollars, but it is the reverse onshore. Local commercials have not fully hedged their dollar positions."
The ringgit, like other Southeast Asian currencies, has been hit by speculative attacks over the past month, losing about nine percent of its value.
The Bank Negara spent $2.0-3.0 billion of its reserves in June to defend the currency.
Dealers said they were surprised by Mahathir's remarks, following his stinging verbal attacks on speculators and the introduction of capital control measures.
Bank Negara last week ordered local banks to limit non-trade related currency swaps to $2.0 million with each overseas customer, in an attempt to reduce foreigners access to the ringgit.
Dealers and analysts said the ringgit was also pressured by a weak Malaysian stock market and fears of possible overheating in the economy.
Local shares continued to be battered by foreign selling, with the benchmark Composite Index falling 2.84 percent to 905.87 at the morning close on Monday.
Concern about the economy followed Malaysia's surprisingly high loans and monetary growth figures for June, despite steps by Bank Negara to curb them.
Bank Negara announced last Wednesday that broad money supply or M3, grew by 21.9 percent year-on-year in June against 20.3 percent in May and 22.9 percent in the same month last year.
Loans growth in June rose to an annualized 30 percent from 29.5 percent at the end of May.