MALAYSIA'S ringgit fell to an eight-week low after Fitch Ratings cut the outlook on the nation’s local currency debt rating to “negative” from “stable,” citing the government’s widening budget deficit.
The currency extended its worst start to a year since the Asian financial crisis after US reports showed manufacturing shrank and consumer spending dropped for an unprecedented sixth month in a row. A global recession is curbing demand for goods produced in Asia and prompting investors to favor safer bets than emerging markets.
“As long as the US economy and stock market continue to suffer, it will affect currencies like the Malaysian ringgit and Singapore dollar,” said Hideki Hayashi, chief economist at Shinko Securities Co in Tokyo. “Investors will prefer to keep their assets liquid and this will sustain the demand for US dollars, at least in the next six months.”
The ringgit traded at 3.6240 per dollar as of 9:49 am in Kuala Lumpur from 3.6077 on January 30. The currency earlier reached 3.6365, the weakest since December 9. It fell 4.3 per cent last month, the worst January since 1998. Malaysia’s financial markets were shut yesterday for a holiday.
Malaysia last month reported the biggest drop in overseas sales in almost seven years for November and said industrial output shrank the most since 2004.
Asian economies such as South Korea and Taiwan, and to a lesser extent Malaysia, will feel the impact of the drop in US demand because of the concentration of electronics goods such as semiconductors and memory chips in their overseas shipments, Hayashi said.
Deputy Prime Minister Datuk Seri Najib Tun Razak on January 29 said Malaysia will unveil a second fiscal stimulus program to help revive growth. The budget deficit will be revised up from its forecast of 4.8 per cent of gross domestic product, he said. - Bloomberg
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