The plunging ringgit has hit levels not seen against the Singdollar since at least 1981, amid fears that Malaysia's sovereign debt rating might be downgraded.
One Singapore dollar could buy about RM2.80 yesterday, with analysts tipping more falls ahead.
The Malaysian currency has depreciated dramatically in recent months, falling 6 per cent against the Singdollar this year.
It is under attack on multiple fronts - including strife at heavily indebted state investment fund 1Malaysia Development Berhad and plunging oil prices. Malaysia is a major oil exporter so the price slump has hit revenue hard.
Market watchers are also concerned that credit ratings agency Fitch Ratings might downgrade Malaysia's sovereign debt rating.
Fitch has a negative outlook on Malaysia's existing "A-" rating and expects to review its numbers before the end of this month, it told The Straits Times.
The ringgit has been Asia's worst-performing currency over the past month, tumbling more than 3 per cent against the greenback.
DBS senior currency economist Philip Wee said it is likely to fall further this year and could reach RM2.87 to the Singdollar.
However, Bank of Singapore foreign exchange strategist Sim Moh Siong noted that the ringgit has been "too heavily punished relative to its Asian peers".
"The picture is less dire than what the near-term momentum suggests... The financial conditions in Malaysia today are more supportive compared with what we have seen in the Asian financial crisis," he said.
"So far, the ringgit depreciation and the financial conditions have been quite orderly."
The weaker Malaysian currency has been a boon to travellers from Singapore, with moneychangers telling The Straits Times that demand peaked last week, due in part to the school holidays.
Mr Mohamad Rafik, a staff member at Arcade Money Changers in Raffles Place, where the ringgit was being sold for RM2.785 to one Singdollar, said business goes up by about 20 per cent during this period every year, adding: "In the 10 years that I have worked here, this is the lowest the ringgit has gone."
The ringgit has fallen about 8.5 per cent against the Singdollar since the holidays last June, when it was worth RM2.58.
The weaker currency has also benefited Singapore companies with operations in Malaysia.
Mr Alex Lau, chief executive of Anacle Systems, which deals in energy-efficiency management systems, said the firm has experienced "huge savings".
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