CURRENCY SHOCK: Ringgit falls to 30-YEAR-LOW against Singdollar

The ringgit has slumped to its lowest level in more than 30 years against the Singdollar, as markets reacted to strong economic data from the United States and a scandal at a Malaysian state-backed fund.

One Singdollar could buy about RM2.77 yesterday - the weakest the Malaysian currency has been against the Singdollar since 1981.

There is even talk that the ringgit could slump to the point where one Singdollar buys RM3.00.

Money changers said that there has been an uptick in demand for the currency, which has been battered over the past year amid plunging oil prices.

Malaysia is a major oil exporter, so the slump in oil prices has hit national revenue hard.

The ringgit's latest bout of weakness is due to a number of factors, said Phillip Futures investment analyst Howie Lee.

First, recent robust US economic data has bolstered expectations of an interest rate hike there this year.

The critical US non-farm payrolls data, released on Friday, is seen as a key barometer of the world's largest economy and came in better than expected.

The stronger US data prompted an outflow of money from Malaysian markets as investors left in search of higher yields, Mr Lee said.

Mounting troubles at heavily indebted state investment fund 1Malaysia Development Berhad (1MDB) also contributed to the ringgit's slide, he noted.

The fund is under investigation for alleged impropriety in some of its deals, and the situation has cast a pall over Malaysian financial markets.

Analysts say the ringgit could weaken further, given the country's shaky economic fundamentals.

"China may pose further problems to Malaysia as demand for industrial machinery and raw commodities weakens. Malaysia also faces problems of weakening reserves, weak purchasing power, a potential overshoot of budget and high debt foreign ownership," said Mr Lee, who added that the currency might depreciate to RM2.85 or even RM3.00 against the Singdollar.

Malaysia's April exports data, released on Friday, was dragged down by flagging liquefied natural gas (LNG) shipments and came in weaker than expected, noted Credit Suisse economist Michael Wan in a research note.

"The full impact of the oil price decline has not filtered through to the trade numbers yet, as LNG prices tend to reflect oil prices with roughly six months lag," he said, adding that he sees "the fundamentals putting further pressure on the ringgit".

Moneychangers were doing a brisk business in the ringgit yesterday.

A staff member from Aliffan Agency at The Arcade in Collyer Quay, who wanted to be known only as Deen, said the shop's stock has sold out every day over the past few days.

When The Straits Times visited at 4pm yesterday, he said there had been long queues in the morning.

"We stock about RM1 million daily and our stock has sold out today. However, this high demand is also due to the current holiday season and may decline after, so for now, we do not plan on increasing our current stock."

Money changers said the ringgit has been selling between RM2.71 and RM 2.73 to the Singdollar over the past week.

Malaysian Ho Li Yee, 45, is a regular buyer of the currency. She bought $2,000 worth of ringgit yesterday as "now is a good time to buy, before the ringgit strengthens again". -  My Paper