Electronics a bright spot amidst ringgit concerns

A US rate hike could spur capital outflows from Malaysia as debt yields become less attractive.

KUALA LUMPUR: All 21 economists polled by Bloomberg predicted that Bank Negara would maintain the overnight policy rate at 3.2 per cent as it has since July last year as the ringgit continued to head south amidst crude oil and palm oil price declines but brightened by the electronics sector which grew in August by the most seen in 16 months. “The ringgit weakened 0.9 per cent to 4.3012 against the US dollar just after midday on Thursday after US Federal Reserve Chairperson Janel Yellen said a December rate hike was a ‘live possibility’ if US economic data continue to point to growth and firmer prices.”

The odds of a US rate hike, according to Bloomberg was based on futures contracts, climbed from 50 per cent to 56 per cent. A US rate hike could spur capital outflows from Malaysia as debt yields become less attractive.

“The ringgit’s move doesn’t raise my eyebrows,” said Masashi Murata, vice president at Brown Brothers Harriman & Co in Tokyo. “It’s down because of the overnight drop in oil prices. Yellen showed an aggressive stance to start hiking prices.”

The ringgit declined more than 18 per cent this year and reached a 17-year-old low in September at 4.48 a US dollar.