KUALA LUMPUR: The ringgit fell to a seven-week low on Wednesday after China cut the yuan's fixing for a seventh day, fueling concern that a slowdown in the region's biggest economy will crimp demand for Malaysian exports.
China's lower reference rate caused risk aversion across Asian markets along with the possibility that North Korea tested a nuclear device following the detection of a 5.1-magnitude earthquake. The country's central news agency later confirmed it had done so. The yuan traded in Hong Kong declined to a five- year low on speculation China will favor currency depreciation to spur growth.
“Since the Chinese currency is weakening, it signals that Chinese demand will be weak,” said Sean Yokota, Singapore-based head of Asia strategy at Skandinaviska Enskilda Banken AB. “The North Korea news is also weakening Asian currencies.”
The ringgit dropped 0.6 percent to 4.3705 a dollar as of 11:24 a.m. in Kuala Lumpur and earlier fell to 4.3783, the lowest level since Nov. 19, according to prices from local banks compiled by Bloomberg. The currency declined the most in Asia last year amid a slump in commodities, a political scandal involving Prime Minister Najib Razak and concern about rising debt at a state investment company.
The yield on Malaysia's government bonds maturing in 2019 rose three basis points to 3.34 percent, prices from Bursa Malaysia show.
China is Malaysia's second-biggest overseas market and official data on Thursday may show shipments from the Southeast Asian nation rose 12 percent in November from a year earlier, according to the median estimate in a Bloomberg survey. They increased 16.7 percent in October.
The regime in Pyongyang detonated a hydrogen device at the Punggye-ri underground test site in the far northeast, its official Korean Central News Agency said. - Bloomberg
Win a prize this Mother's Day by subscribing to our annual plan now! T&C applies.
