The ringgit retreated 1.2% to 4.2570 a dollar as of 9.41am in Kuala Lumpur today, after losing 2.1% in the last two trading days. – The Malaysian Insider file pic, October 20, 2015.
The ringgit dropped to its lowest in almost two weeks on concern falling raw-materials prices will hurt government income and widen the budget deficit.
The Bloomberg Commodity Index declined 1.4% yesterday, the biggest loss in a month, after China reported industrial output and fixed-asset investment data for September that missed estimates.
Malaysia derives 22% of its revenue from oil-related exports and Prime Minister Datuk Seri Najib Razak is scheduled to deliver the Budget 2016 on Friday.
“The weakening trend of the old part of the Chinese economy, underlined by the downside surprise in the industrial production and fixed-asset investment, weighed on commodity prices such as crude oil and base metals,” said Sim Moh Siong, a foreign-exchange strategist at Bank of Singapore Ltd.
“This is negative for commodity currencies, such as the ringgit.”
The ringgit retreated 1.2% to 4.2570 a dollar as of 9.41am in Kuala Lumpur today, after losing 2.1% in the last two trading days, according to prices from local banks compiled by Bloomberg.
The currency sank as low as 4.2853, its weakest since October 7.
While China’s gross domestic product increased 6.9%, beating the median estimate in a Bloomberg survey for a 6.8% gain, its industrial-output growth of 5.7% fell short of the 6% predicted.
The country is the world’s second-largest economy and No. 1 consumer of energy, metals and grains.
The Budget 2016 will be “one of the most difficult”, Najib was quoted as saying in a New Straits Times report yesterday.
Najib is seeking to trim the fiscal shortfall to 3.2% of GDP this year from 3.5% in 2014.
Malaysia is Asia’s only major net exporter of crude oil and is also the world’s second-biggest producer of palm oil, which despite recovering some ground from a 2015 low in August is still down 8% from this year’s peak in September.
Malaysia’s government bonds maturing in September 2025 fell, pushing the yield up by one basis point to 4.13% Tuesday, prices from Bursa Malaysia show. – The Edge Markets
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