Malaysia's ringgit hit a near six-year low on Tuesday after the government adjusted its economic targets to cope with sliding oil prices, while most emerging Asian currencies fell on the dollar's broad strength and a slowing global economy. The country increased its fiscal deficit target to 3.2 percent of gross domestic product for 2015 and cut its forecasts for economic growth and inflation to adjust its budget after a sharp fall in earnings from oil and gas, Prime Minister Najib Razak announced earlier.
Najib said the revised budget would assume a global oil price of around $55 a barrel. The government had assumed a price of $100 a barrel last October, whereas the price of Brent crude has fallen by more than half to levels below $50. After that, the ringgit fell as much as 0.9 percent to 3.6030 per dollar, its weakest since April 2009.
"The MYR will remain trading within the 3.60-3.70 range in coming quarters. The measures at least keep it within this broad range for now," said Suresh Kumar Ramanathan, head of regional interest rate and FX strategy at CIMB Investment Bank in Kuala Lumpur. "The budget though realistic and takes into account the current circumstances, there is still risk ahead for the global macro market," said Ramanathan, citing risks of lower crude prices and expectations of US interest rate hike. The ringgit was the worst performing Asian currency so far this month with a 2.9 percent loss against the dollar, Thomson Reuters data showed. The Malaysian unit fell by the most among emerging Asian peers on fears that sliding oil prices may hurt the country's current account surplus and widen the fiscal deficit as it is a net oil exporter.
WON South Korea's won led losses among emerging Asian currencies as the dollar broadly gained against major currencies. The greenback rose versus the euro ahead of possible stimulus by the European Central bank on Thursday, while it hit a one-week high against the yen on short-covering.
The won came under further pressure on the yen's weakness, given export competition between South Korea and Japan. South Korea's importers also bought the dollar for payments. China's economic growth in the fourth quarter slightly beat market expectations, but the world's second-largest economy in 2014 expanded at its slowest pace in 24 years, cementing concerns over a slowdown in the economy.
Adding to the gloom, the International Monetary Fund lowered its projection for global economic growth this year. "China recorded the slowest growth in 24 years and the IMF just cut global growth forecast. How can we be long Asian currencies?" said a senior Malaysian bank trader in Kuala Lumpur.
RUPIAH The Indonesian rupiah turned higher on demand for the government bond auction later in the day. The finance minister aims to sell 12 trillion rupiah ($952.00 million) in the day.