Ringgit Suffered Biggest Drop In 10 Months Due To Oil & 1MDB Scandal
Last week, as Malaysia was rocked with the US Department of Justice civil suit in relation to the misappropriated funds from 1MDB, Bloomberg reported that the Malaysian ringgit were headed for its biggest weekly tumble since last year.
The currency slide was due to lower crude oil prices and the controversial reports involving state-owned fund 1MDB.
Brent crude oil saw a decline by 2.8% in five days and this has negatively impacted the outlook for oil-exporting country’s revenues.
The weakening currency was further exacerbated by reports of authorities in Singapore and the United States in forfeiting assets connected to alleged fraud involving 1MDB.
The Bloomberg reported that this latest unsavoury news involving 1MDB could contribute to the ringgit’s biggest annual drop last year, since 1997.
“The market is now looking at pricing in a higher probability of a rate hike by the Fed this year,” said Irene Cheung, a foreign-exchange strategist in Singapore at Australia & New Zealand Banking Group Ltd.
The prices of oil have affected the currency while the controversy surrounding 1MDB may have “an impact on the political front, which we don’t know how it will work out and how serious it is”, she added.
According to the same report, the Malaysian ringgit declined by 0.5% last Friday, and 2.8% overall last week, to 4.0608 per dollar as of Friday, 10.34am in Kuala Lumpur.
This is the biggest drop in value since September 25, said the report.
This was amidst the report of the US Department of Justice allegation that more than US$3.5 billion was misappropriated from 1MDB and approximately US$1 billion were laundered through the country’s banking system.
Following that, it has moved to forfeit 17 items including properties, a jet and valuable artwork.