Ringgit, the major currency of Malaysia has declined to a figure which is the lowest in last 11 weeks after the recent industrial report coming out of US boosted speculation that the Federal Reserve will be reducing the stimulus which has increased flow of funds to emerging markets, including Malaysia. The Government bonds of Malaysia experienced tumble too.
Incidentally, only on last month, the chairman of the Federal Reserve, Ben S. Bernanke stated that the monthly bond buying which is also known as quantitative easing could be scaled back if they see signals of improvement in the market to sustain. Incidentally, monthly bond buying is at $85 billion currently. Apart from that, the no. 2 overseas market of Malaysia, China saw its industrial production and exports to decline more than estimates for the last month. The figures were released over the last weekend.
According to an economist of the Oversea-Chinese Banking Corp., Gundy Cahydi, Federal Reserve is having a vigilant eye on the market of the country and the recent data coming out of the biggest economy in the world can play a major role in tapering down quantitative easing in the third quarter.
On today, Ringgit experienced a decline of 1% and the same is currently at 3.1270 per USD. Ringgit has actually experienced its biggest tumble on today since 29th May. At one point of time on today, it touched 3.1312 per USD, marking its weakest level since 20th March. Ringgit also became the 3rd worst performing currency among the most traded currencies of Asia, only after Philippine Peso and Indian Rupee.
According to the Strategist of Societe Generale, Wee-Khoon Chong, the Asian currencies are expected to stay on the weaker zone for the next few days. Chong added that the biggest risk is for currencies such as Indonesian Rupiah, Indian Rupee and Ringgit. These are going to experience further unwinding and Chong thinks that these will go through increased level of currency volatility as well.
The overseas shipments of Malaysia dropped by 3.3% in April, if compared to figures of a year earlier, marking the 3rd straight monthly decline. The results are worse compared to the forecasted gain of 0.4% by the economists. The official figures were released on 7th June. The yield on the 3.26% Government bonds which are due in March, 2018 jumped ahead by 3 basis points.