Ringgit slides to 10-month low of 2.63 against SGD
FALLING oil prices pushed the ringgit to a 10-month low against the Singapore dollar on Monday, on concerns that Malaysia's heavy reliance on oil-related revenue would hurt growth.
One Singdollar now buys RM2.63, a 2.3 per cent slide from RM2.57 last week. This was the ringgit's steepest two-day slide since the Asian financial crisis, and analysts expect that it will fall further.
"We see the next major resistance at 2.67," said United Overseas Bank economist Ho Woei Chen. Since Malaysia draws almost a third of government revenue from state oil company Petronas, it is more exposed to oil price volatilities than oil-importing countries such as Singapore, she said.
On Friday, Petronas delivered some bad news when it announced plans to cut its capital expenditure by 15 to 20 per cent next year, on the basis of a lower oil price outlook.
"A lot depends on what happens with oil prices," agreed Westpac Banking senior currency strategist Jonathan Cavenagh. "Both Singapore and Malaysia are exposed to the oil price stories, but more so Malaysia."
Mr Cavenagh expects the ringgit to slide further to RM2.65 against the Singdollar over the next six months.
Credit Suisse's senior foreign exchange strategist, Heng Koon How, said that this might happen any time in the next 12 months, noting that the ringgit has been "more volatile" since the Organisation of the Petroleum Exporting Countries opted not to reduce a supply glut last week.
Ms Ho also cited "concerns of a current-account deficit in the fourth quarter and the prospect of the government missing its fiscal-deficit target next year" as some reasons for the underperformance of the ringgit against other regional currencies.
"Falling prices of other commodities, including palm oil and rubber, have also weighed on sentiment," she said.