Malaysia’s Ringgit Drops on Economic Outlook, Mideast Tensions

By David Yong

Jan. 6 (Bloomberg) -- Malaysia’s ringgit fell for a third day, the longest stretch since the start of December, on concern deepening recessions in the world’s major economies will sap demand for regional assets.

The ringgit traded near the lowest level against the dollar in three weeks on speculation the escalating war between Israel and Hamas, and rising oil prices, will increase demand for the U.S. currency. Economists estimate a report from Malaysia’s trade ministry tomorrow will show exports slumped in November by the most since February 2002.

“The market reflects demand for safe-haven assets due to the prolonged crisis, and to a smaller extent, the weak economic data,” said Tan Voon Ching, a currency trader at OSK Investment Bank Bhd. in Kuala Lumpur.

The ringgit weakened 0.3 percent to 3.5075 per U.S. dollar as of 9:40 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. It earlier reached 3.5138, the lowest since Dec. 18.

Exports declined 5.7 percent in November from a year earlier, according to the median estimate in a Bloomberg News survey of economists. They slipped 2.6 percent in October, the first contraction since July 2007.

Foreign investors reduced their holdings of ringgit- denominated bills and bonds for a sixth straight month in October from a record amount in April, according to the latest Bank Negara Malaysia statistics issued in December.

“Data out of Asia highlight the trend of falling inflation, slowing growth and deteriorating external accounts, which we view as negative for regional currencies,” Win Thin, a senior currency strategist in New York at Brown Brothers Harriman & Co., said in a research note. “Policy makers may not want to see significantly stronger currencies for the time being.”

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