Global Cooling Alert: Malaysian FX, Exports And Hot Capital Hit Deep Slump

Y-Sing Liau at Bloomberg

The ringgit slid to a nine-year low after a U.S. jobs report beat forecasts, backing the case for the Federal Reserve to start tightening monetary policy as money flows out of Malaysian stocks.

The dollar rose against 13 of the world’s 16 major currencies on Friday after data showed U.S. employers created 280,000 positions in May, the most in five months and exceeding the median estimate in a Bloomberg survey for a 226,000 gain. Malaysian exports contracted in April for a third month this year, and the trade surplus narrowed, figures showed last week. Overseas investors sold more of the nation’s equities than they bought in May, taking out the most funds of any month this year.

“Strong U.S. non-farm payrolls sent the dollar rallying across the board,” said Khoon Goh, a Singapore-based senior foreign-exchange strategist at Australia New Zealand Banking Group Ltd. “Last Friday’s disappointing Malaysian export data is also pressuring the ringgit.”

The currency weakened 1.4 percent to 3.7720 versus the greenback in Kuala Lumpur, the biggest drop in Asia, according to data compiled by Bloomberg. It earlier fell to 3.7743, the lowest level since January 2006 and close to the 3.8 level at which it was pegged until 2005.

Twelve-month non-deliverable ringgit forwards declined 0.4 percent to 3.8788 as of 5:38 p.m. local time, after depreciating to 3.8840, the lowest in more than a decade.

Malaysia imposed a fixed exchange rate in 1998 as part of capital controls imposed under former Prime Minister Mahathir Mohamad at the height of the Asian financial crisis. The currency tumbled 35 percent the previous year as the Thai baht was devalued. Speculators drove the ringgit to a record low of 4.885 a dollar in January 1998.

Mahathir banned trading of the ringgit outside the country, blaming U.S. billionaire George Soros and

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