Malaysian ringgit drops further

Data showed that the greenback had strengthened nearly 6% against the ringgit year-to-date and over 14% from a year ago. (AFP file pic)

PETALING JAYA: The ringgit closed little changed against the US dollar yesterday despite having dropped to a low of 3.724 in intraday trade as investors reacted to the sustained slowdown in the Chinese economy.

The currency closed at 3.706 with a Reuters report noting that offshore funds sold the ringgit in non-deliverable forwards market as five-year government bond prices fell. The yield on the five-year bond closed at 3.657% from Tuesday’s close of 3.558%.

Data showed that the greenback had strengthened nearly 6% against the ringgit year-to-date and over 14% from a year ago.

Malaysia’s exports to China has contracted since March last year although the latter remained the country’s largest trade partner, contributing 14.7% to total trade and 12.1% to exports last year.

Asian equity markets were choppy as investors also reacted to how a sustained slowdown in China could have a greater impact in the region given the closely-knit supply-chain.

According to China’s National Bureau of Statistics, gross domestic product (GDP) for the first quarter ended March 31 grew 7% compared to the same quarter a year ago, the slowest in six years. GDP grew 7.3% in the previous quarter.

Singapore-based Commonwealth Bank of Australia Asian currency strategist Andy Ji said in the Reuters report that “abundant downside risks” remained because potential monetary easing by China might not help Asian currencies much as fresh liquidity might not flow into the real economy and financial markets due to slowing global growth.

Analysts have noted that a combination of weak crude oil prices and volatile exports have had a negative impact on the ringgit, with several noting that the currency could weaken further in the second-half of the year.

Meanwhile, a separate Reuters report said Malaysia’s US$2bil sukuk had attracted orders of more than US$6.5bil (RM24.1bil) with sources saying that the issue could have a maturity of more than five years.

“Price guidance on the dual-tranche offering of 10 and 30 years yield around 135 basis points (bp) and 185bp over US Treasuries, respectively. With the strong demand, the possibility of compressing the guidance by 10bp to 20bp is highly likely,” it added.

Various reports said the Government would use the proceeds to refinance US$1.25bil of sukuk maturing this year.

Standard & Poor’s assigned a preliminary A- issue rating to the sukuk, while Moody’s assigned a provisional (P)A3 senior unsecured rating. CIMB Group Holdings Bhd, HSBC Holdings Plc and Standard Chartered Bank Plc are the lead arrangers for the offering.