Malaysia Ringgit Drops in Longest Losing Streak Since Peg Ended

By David Yong

Aug. 12 (Bloomberg) -- Malaysia's ringgit fell for an eighth day, the longest losing streak since a peg to the dollar was scrapped in July 2005, on speculation the economy will cool as exports slow and faster inflation curbs consumer spending.

The currency has dropped every day this month and its 2.1 percent slide against the greenback is second only to the Singapore dollar's among Asia's 10 most traded currencies outside Japan. Malaysia's $147 billion economy expanded at a ``moderate'' pace in the second quarter, Prime Minister Abdullah Ahmad Badawi said yesterday.

``Recent data signal more downside risk to the currency,'' said Joanna Tan, a Singapore-based economist at Forecast Pte. ``Malaysian exports are susceptible to headwinds and won't escape the erosion in global demand.''

The ringgit fell 0.4 percent to 3.3285 per dollar as of 9:10 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. The currency earlier touched 3.3295 per dollar, its low for the year.

JPMorgan Chase & Co. today cut its ringgit forecast for a second time in two weeks, reducing its year-end target to 3.38 per dollar from 3.20. Electronics exports from South Korea, Taiwan, Singapore and Malaysia will bear the brunt of a slowdown in the U.S., Japan and Germany, the bank said in a research note.

Governor Zeti Akhtar Aziz yesterday said any market intervention won't be done to affect the underlying trend of the ringgit. The central bank will report second-quarter gross domestic product on Aug. 29 and the government will present its 2009 budget on the same day.

Malaysia's economy grew 7.1 percent from a year earlier in the first quarter, after expanding 7.3 percent in the final three months of 2007. Singapore, which was Malaysia's biggest overseas market in the first half, yesterday reported the slowest economic growth in five years and forecast exports would drop this year for the first time since 2001.

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net.