Ringgit weakens most in Asia as psychological reserves mark eyed

[KUALA LUMPUR] The ringgit weakened the most in Asia on concern Malaysia's foreign-exchange reserves dropped to the lowest level since the 2008 global credit crunch, reducing ammunition to defend the region's worst-performing currency.

The holdings declined 13 per cent this year to US$100.5 billion amid a 10 per cent plunge in the ringgit, fueling speculation Bank Negara Malaysia intervened by buying the currency. A slump in oil, a political scandal involving Prime Minister Najib Razak and the prospect of higher US interest rates have sent the ringgit to a 17-year low. Figures for the two weeks to July 31 are due on Friday.

"The market is probably getting nervous because reserves are expected to fall below the psychological US$100 billion mark given that Bank Negara is seen to be intervening to smooth out volatility in recent sessions," said Nizam Idris, the Singapore-based head of foreign-exchange and fixed-income strategy at Macquarie Bank Ltd. The second-most accurate forecaster for the ringgit in the four quarters through June in Bloomberg rankings predicts they may come in at US$96.5 billion.

The currency declined 0.3 per cent at 3.8905 a dollar as of 12:13 pm in Kuala Lumpur, prices from local banks compiled by Bloomberg show. It earlier fell as much as 0.5 per cent to 3.8948, the lowest since September 1998 when it reached 3.9340.