Saturday, January 24, 2009

Malaysia's ringgit slumps during crisis

ABDULLAH Ahmad Badawi diberi penerangan mengenai projek Pulau Al Reem, Abu Dhabi di Emiriyah Arab Bersatu (UAE), semalam. - BERNAMA



Kuala Lumpur: Malaysia's ringgit fell for a third week on speculation the central bank will keep cutting interest rates to aid exporters and spur economic growth. Bonds rallied.
The currency traded near a seven-week low on concern slowing global demand for Asian goods and falling commodity prices will curb overseas shipments and hurt corporate profits in Malaysia, which exports palm oil and crude.
Singapore, the US and Japan, the nation's three-biggest trading partners, are all in recession.
"If the first-quarter data continues to be weak, there's certainly going to be expectations for another round of rate cuts," said D. Sivadass, a currency options trader at EON Bank Bhd in Kuala Lumpur. "That may keep the ringgit on the weaker bias for a while."

The ringgit slumped 1.4 per cent to 3.6263 per US dollar as of 5 pm in Kuala Lumpur from a week earlier, according to data compiled by Bloomberg.
The currency fell as much as 0.5 per cent yesterday to 3.6263, the weakest since December 9.
Bank Negara Malaysia on January 21 lowered its overnight interest rate by a record to 2.5 per cent from 3.25 per cent, citing the deteriorating outlook for exports.
The ringgit's 4.8 per cent decline this month is the second-worst performance among Asia's 10 most-traded currencies, and already exceeds a 4.2 per cent loss in 2008.
The currency may weaken to 3.64 by the end of June, according to the median forecast in a Bloomberg News survey of 21 banks.
Singapore, which accounted for 13 per cent of Malaysia's external trade, said this week the city-state's economy may shrink as much as 5 per cent in 2009.
China's economy, the world's third-largest, expanded in 2008 at the slowest pace in seven years.
"The contraction in global demand and trade, combined with the reduction in global commodity prices, has affected the export earnings of many of the regional economies, including Malaysia," Bank Negara said in its policy statement on January 21.
Government bonds rallied for a fifth day, handing investors their best weekly returns since November.
Three and five-year benchmark yields fell to the lowest levels since at least 1998 when Bloomberg began tracking the debt market.
The yield on the 3.833 per cent note due in September 2011 slid 45 basis points this week to 2.45 per cent, according to Bursa Malaysia Bhd. The price rose 1.15, or 11.5 ringgit per 1,000 ringgit face amount, to 103.55. The yield dropped 1 basis point, or 0.01 percentage point, yesterday.
"It's now evident that the market underestimated the dovishness of the central bank," Edward Lee, a regional fixed- income strategist in Singapore at Standard Chartered Plc, said in a research note yesterday. "The overall environment is positive for local rates, particularly in the early part of the year."
Standard Chartered forecast the central bank will lower its overnight rate to 1.5 per cent by the end of the second quarter, said Lee, who confirmed the report.
Three-year yields will drop to 1.8 per cent by June, he forecast.

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