PETALING JAYA - Weak commodity prices, concerns about the impact of slowing growth in China and lingering domestic political worries continued to take a toll on the ringgit.
The currency exchange rate against the US dollar fell to a new 17-year low of 4.339 yesterday. It was at its weakest to the Singapore dollar at 3.056.
"It's been a mix of political uncertainties, weak China data and falling commodities prices," said a currency trader.
Moody's Investors Service, in a report yesterday, slashed its growth forecast for China and many countries around the Asia-Pacific region.
"We have previously expected regional output to pick up from this year to next, we now expect a slower but solid rate of growth in 2015 and 2016," the investors' service provider pointed out.
The slowdown could also be longer than expected but most of the countries' sovereign credit indicators would remain.
It revised Malaysia's gross domestic product (GDP) growth from 5 per cent to 4.5 per cent next year while maintaining 4.8 per cent growth for this year.
It trimmed China's GDP growth next year to 6.3 per cent from 6.5 per cent and India to 7.5 per cent from 7.6 per cent.
"The sharp decline in energy prices is painful for Malaysia (A3 positive), where income from oil and natural gas make up around 30 per cent of government revenue and over 20 per cent of exports," Moody's noted, adding that dampened sentiment had led to a slowdown in private sector consumption in the country while soft external demand also had an impact. Malaysia has been China's biggest trading partner since 2008, and any negative news from the world's second largest economy would have a spill-over effect on the country.
Last year, trade between the two countries stood at US$102bil.
Australian exports to China had also dropped to a six-year low.
The ringgit has fallen 19.42 per cent year-to-date to the US dollar while the Australian dollar has lost 14.63 per cent, and the rupiah dropped 13.25 per cent.
"The only way for ringgit to recover is for the newly-formed special economic committee to propose the right proactive measures to calm the market," one treasury head opined.
Asian currencies, including the ringgit remained vulnerable.
On capital account volatility, Moody's expected that pressures on exchange rates and reserves in many Asian countries would remain, as international markets react to slower growth among the emerging markets, and the likelihood of the US Federal Reserve raising interest rates.