Malaysia's ringgit hit a more than three-week low on Thursday, on renewed concerns over scandal-plagued state-owned fund 1Malaysia Development Berhad (1MDB), while most emerging Asian currencies eased as the dollar held firm. The ringgit fell 0.6 percent to 4.0540 per dollar, its weakest since June 29. Kuala Lumpur stocks and Malaysian government bond prices slid.
Singapore authorities have seized assets worth S$240 million ($177 million) in an investigation of 1MDB-related fund flows for possible money laundering, in a probe which has found "deficiencies" at several major banks in the city-state. US prosecutors sued on Wednesday to seize more than $1 billion in assets they said were tied to money stolen from 1MDB, which was overseen by Prime Minister Najib Razak, and used to finance "The Wolf of Wall Street" film and to buy property and works of art. "The US is trying to blow the fish out of the water. It is definitely MYR negative," said Andy Ji, Asian currency strategist for Commonwealth Bank of Australia in Singapore.
The ringgit was the worst-performing Asian currency last year with a near 20 percent loss against the US dollar. Ji recommended selling the ringgit against Indonesia's rupiah, adding that "given the 1MDB issue, it looks the relative value play should work." The rupiah is the second-best performer among emerging Asian currencies so far this year. Investors are enticed by one of the highest yields in the region and also Indonesia's tax amnesty programme, which is expected to improve its fiscal balance.
The ringgit has been outpacing the Indonesian currency this year as investors unwound bearish bets on stabilising oil prices and expectations of global economic stimulus. Most emerging Asian currencies edged down on the dollar's broad strength as recent solid US economic data supported expectations the Federal Reserve may raise interest rates later this year.
China's yuan, however, edged up following heavy intervention by state-owned banks over the past few sessions. Meanwhile, investors are staying on the sidelines ahead of a Group of 20 meeting of finance minister and central bankers in China this weekend. The renminbi's strength helped regional currencies recover some of their earlier losses. The Thai baht eased on lower government bond prices after foreign investors on Wednesday turned to net sellers of local debts.
Foreign investors dumped short-term notes with maturities of less than one year on expectations that the baht may weaken due to the dollar's strength. They were net buyers of long-term bonds. The baht pared some of its earlier losses, tracking regional peers.