KUALA LUMPUR, May 26 — The sharp depreciation of the ringgit versus the US dollar was in line with a larger decline of regional currencies against the greenback, Bank Negara Malaysia said after the local note fell to a six-month low earlier today.
Already among Asia’s worst performers, the ringgit fell to 4.6385 to the dollar earlier this morning, revisiting a low not seen since before the 15th general election, and closed at 4.6010, down sharply from this year’s peak of 4.2440 in January.
BNM also said the ringgit’s decline was due to developments in the US and Europe that caused investors flocked to the dollar as a safe haven.
“Consequently, the ringgit, like most currencies, has faced heightened depreciation pressures. The recent depreciation of the ringgit is therefore not limited to Malaysia alone,” the central bank said in a statement.
It also said the ringgit’s decline against the dollar was not representative of its overall performance, which BNM said was less severe when measured using the nominal effective exchange rate.
BNM also said the ringgit’s exchange rate to the dollar was not representative of the Malaysian economy’s performance, but primarily a result of outside developments such as the US debt ceiling impasse and the crisis surrounding US and European regional banks.
The central bank said it would continue to monitor the movement of the ringgit in the global market and take measures to ensure there was sufficient liquidity in the country.
“The ringgit’s performance should improve as uncertainties from global market developments subside.”
The ringgit has steadily declined against the US dollar since the end of January, but the fall accelerated when the US Federal Reserve kept up its interest rate increases — 10 in 14 months so far — that have already pushed the key rate to 5.25 per cent there.
But BNM was right in saying that the recent strengthening of the US dollar has not affected just the ringgit, but most Asian currencies.
The Singapore dollar has also fallen to a two-month low against the dollar, while the Korean won and Indonesian rupiah have also touched recent lows against the greenback.
While US lawmakers face a key deadline today to complete negotiations and raise the country’s debt ceiling to avoid a potentially devastating credit default, the US dollar index has stayed resilient, hitting a two-month peak of 104.1 yesterday.