Malaysia's ringgit fell to the lowest level since June 2010 and bonds declined after Federal Reserve minutes showed policymakers back chairman Ben Bernanke's plan to cut stimulus, boosting US dollar demand.
Ringgit forwards dropped the most in two months and the benchmark stock index slipped to the lowest since May, tracking a sell-off across Asian markets.
Fed members are "broadly comfortable" with the plan to reduce bond-buying later this year should the economy improve, according to the record of the July 30-31 meeting.
Malaysia's current-account surplus fell to the lowest since at least 1999, data showed yesterday, while the central bank pared its 2013 growth forecast.
"The dollar was strong after the minutes," said Nizam Idris, the head of fixed income and currency strategy at Macquarie Bank in Singapore. "The market is still worried and probably pricing in the potential for Malaysia's current account to fall into deficit."
The ringgit fell to 3.31423 per US dollar yesterday afternoon in Kuala Lumpur. It touched 3.3220, the weakest since June 10, 2010.
One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose 67 basis points to 10.41 per cent.
One-month non-deliverable forwards dropped 1 per cent to 3.3265 against the greenback, the lowest since June 2010 and 0.3 per cent weaker than the spot rate.
Southeast Asia's third-largest economy may expand 4.5 per cent to 5 per cent this year, compared with a previous prediction of as much as 6 per cent, the central bank reported.
The current-account surplus shrank to 2.6 billion ringgit (HK$6.12 billion) in the second quarter from 8.7 billion ringgit in the previous three months.
The yield on the government's 3.172 per cent bonds due in July 2016 climbed three basis points, or 0.03 percentage point, to 3.47 per cent, according to data. The rate on 10-year notes rose four basis points to 3.99 per cent.