Malaysia's ringgit will drop to a 15-month low by the end of 2008 as a widening budget deficit, slowing growth and political turmoil will spur global funds to flee, according to CIMB Investment Bank Bhd.
The ringgit will weaken to RM3.5 a dollar as a wider deficit stokes concern the nation's credit-rating outlook will be cut, said Suresh Kumar Ramanathan, a rates and currency strategist in Kuala Lumpur.
Malaysia's biggest investment bank in February had predicted the currency will strengthen to RM2.95 by December 31.
"A large fiscal deficit is being priced into the market," he said in a phone interview in Kuala Lumpur yesterday. The currency will weaken as "the central bank shifted focus from inflation- fighting to growth concerns, and the danger of regime change is beginning to feed through," he said.
The ringgit declined 1.9 per cent this week, its biggest five-day loss in 15 months, after Prime Minister Datuk Seri Abdullah Ahmad Badawi on August 29 said the budget deficit will swell to 4.8 per cent of gross domestic product, from 3.2 per cent in 2007.
The ringgit's slump has also occasionally breached the lower band of its trade-weighted valuation in recent weeks. The lack of support from the central bank could further weaken its medium-term outlook, Suresh said.
Kuala Lumpur-based CIMB also revised its year-end forecast for Thailand's baht to 36.5 per dollar from 29, Indonesia's rupiah to 9,000 from 8,600, Singapore's dollar to S$1.45 from S$1.3 and South Korea's won to 1,200 from 1,000.
"The dollar is on a roll and Asian currencies are on the defensive," Suresh said. "Much of the slowdown ahead is due to the current de-gearing" as global banks pulled their money from the region to replenish capital eroded by credit-market losses, he added. - Bloomberg
The ringgit will weaken to RM3.5 a dollar as a wider deficit stokes concern the nation's credit-rating outlook will be cut, said Suresh Kumar Ramanathan, a rates and currency strategist in Kuala Lumpur.
Malaysia's biggest investment bank in February had predicted the currency will strengthen to RM2.95 by December 31.
"A large fiscal deficit is being priced into the market," he said in a phone interview in Kuala Lumpur yesterday. The currency will weaken as "the central bank shifted focus from inflation- fighting to growth concerns, and the danger of regime change is beginning to feed through," he said.
The ringgit declined 1.9 per cent this week, its biggest five-day loss in 15 months, after Prime Minister Datuk Seri Abdullah Ahmad Badawi on August 29 said the budget deficit will swell to 4.8 per cent of gross domestic product, from 3.2 per cent in 2007.
The ringgit's slump has also occasionally breached the lower band of its trade-weighted valuation in recent weeks. The lack of support from the central bank could further weaken its medium-term outlook, Suresh said.
Kuala Lumpur-based CIMB also revised its year-end forecast for Thailand's baht to 36.5 per dollar from 29, Indonesia's rupiah to 9,000 from 8,600, Singapore's dollar to S$1.45 from S$1.3 and South Korea's won to 1,200 from 1,000.
"The dollar is on a roll and Asian currencies are on the defensive," Suresh said. "Much of the slowdown ahead is due to the current de-gearing" as global banks pulled their money from the region to replenish capital eroded by credit-market losses, he added. - Bloomberg
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