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Ringgit hits record low of 3.0771 against Sing dollar

SINGAPORE — The Malaysian ringgit continued its free-fall today (Sept 10), plunging to a new all-time low of 3.0771 to the Singapore dollar and a fresh 17-year low of 4.3790 against the US dollar, after ratings agency Standard & Poor’s decision to downgrade Brazil’s rating to junk worsened sentiment towards emerging markets.

People look at the exchange rate at a moneychanger. Reuters file photo

People look at the exchange rate at a moneychanger. Reuters file photo

SINGAPORE — The Malaysian ringgit continued its free-fall today (Sept 10), plunging to a new all-time low of 3.0771 to the Singapore dollar and a fresh 17-year low of 4.3790 against the US dollar, after ratings agency Standard & Poor’s decision to downgrade Brazil’s rating to junk worsened sentiment towards emerging markets.

Hit by the slump in crude oil and other commodity prices, a political scandal involving Prime Minister Najib Razak, and declining foreign exchange reserves, the Malaysian currency had broken the psychological 3.00 level against the Singapore dollar on Aug 24 and is now down 15 per cent for the year. Against the greenback, it has dropped more than ­23 per cent, making it the worst-performing Asian currency this year.

The ringgit clawed back a bit late today to 3.0449 and 4.3127 versus the Sing dollar and US dollar, respectively, ending off the day’s lows.

Brazil’s sovereign rating was cut one notch to BB+ with a negative outlook by S&P, taking away the investment grade the country had enjoyed for seven years, as President Dilma Rousseff struggles to shore up fiscal accounts amid a faltering economy. The move, coupled with the steepest fall in Chinese producer prices since the global financial crisis and expectations of an imminent US interest rate hike, conspired to diminish the appeal of emerging market assets.

“A downgrade in Brazilian bond ratings sparked fears of capital outflows from developing markets, a honestly realistic fear given the US Federal Reserve may raise interest rates as early as next week. We
also had poor trade data from China, while New Zealand’s choice in cutting interest rates sparked fears that there may soon be a currency war in this region,” said Phillip Futures analyst Howie Lee.

“On a macro level, this means that the Singapore dollar is gaining strength on an overall basis, despite continued losses against the US dollar and other major currencies,” he added.

“In the short term, market volatility could still drive the Singapore dollar further higher against the ringgit,” said DBS currency analyst Philip Wee, noting technical trends that pointed to levels around 3.10 to 3.15. 

Mr Lee warned that Singaporean businesses selling to Malaysia would be hurt by the continued weakness in the ringgit, saying: “Singapore’s fortunes are very much intertwined with the fate of Malaysia and Indonesia. A weakened Malaysian economy would not serve Singapore well in terms of goods and services demand.”

The Indonesian rupiah also fell to a record low of 10,119 versus the Singapore dollar today as funds
deserted emerging market assets.

One company feeling the heat is Singapore-listed Best World, which manufactures and distributes premium skincare, personal care, nutritional and wellness products.

Mr Huang Ban Chin, chief operating officer of Best World, said: “We have a subsidiary in Malaysia. Our margins have been eroded, and we need to use more ringgit to pay for the goods as the headquarters here in Singapore produces goods in Singapore dollars.

“We have to increase our prices, and sales to a certain extent has been affected. Our suppliers are asking for higher quotations as well. We now manage our funds carefully as we want to hold as little idle cash in Malaysia to eliminate foreign exchange losses as a result of the depreciation of the ringgit,” he said.

A spokesperson for Singapore construction company Cyclect Holdings, which has operations in Malaysia, said: “We have businesses in Johor and Ipoh ... We try to have as many local staff as possible, so they will be paid in ringgit, and so the impact will not be as significant.” AGENCIES, WITH ADDITIONAL REPORTING BY ANGELA TENG

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