Ringgit falls as China easing deepens growth concern
The ringgit fell as China’s interest rate cut heightened concern that growth in Asia’s biggest economy and a top Malaysian export market is slowing.
The People’s Bank of China also reduced the amount of cash banks must set aside as reserves on Friday to revive an economy set for the slowest annual expansion in a quarter of a century.
Malaysia’s Budget 2016 last week included tax increases for high-income earners and a pledge to further lower the fiscal deficit. The macro economic outlook hasn’t changed though amid lower energy prices and weak domestic demand, according to a Morgan Stanley report today.
“The market is concerned that China is cutting rates because of problems with growth,” said Irene Cheung, a currency strategist at Australia & New Zealand Banking Group Ltd in Singapore. “The market is reacting on the back of the slowdown in the Chinese economy.”
The ringgit dropped as much as 1.5 percent before closing 0.2 percent weaker at 4.2283 a US dollar in Kuala Lumpur, according to prices from local banks compiled by Bloomberg. The currency rallied 1.6 percent on Friday after Prime Minister Najib Abdul Razak announced the Budget. It’s up 3.9 percent in October following a five-month run of losses.
Malaysia’s economy will expand 4 percent to 5 percent next year, from 4.5 percent to 5.5 percent in 2015, according to the Finance Ministry’s 2015/2016 economic report released on Friday.
Overseas investors were net buyers of the nation’s stocks for a third week, purchasing RM230.4 million and reducing outflows this year to RM16.9 billion, according to a report from MIDF Amanah Investment Bank today.
Five-year government bonds fell, pushing the yield up three basis points to 3.71 percent, prices from Bursa Malaysia show.
- Bloomberg
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