In Malaysia, PM Anwar’s frail coalition, uncertainty over Najib’s royal pardon ruling add to ringgit’s woes

PM Anwar’s fragile coalition, and uncertainty over how incarcerated ex-premier Najib Razak’s application for a royal pardon would play out looms over the market

The ringgit has slid more than 1 per cent in January, and is about 3 per cent away from a 25-year low reached in October

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Published: 9:00am, 15 Jan 2024Updated: 10:05pm, 16 Jan 2024

The Malaysian ringgit is vulnerable to a drop toward last year’s low as concerns over the fragility of Prime Minister Anwar Ibrahim’s government add to the currency’s headwinds.

The ringgit’s advance in the last two months of 2023 proved fleeting, as apparent attempts to oust Anwar unnerved investors. The currency is about 3 per cent away from a 25-year low reached in October.

The political chatter is adding to the pressure on the ringgit – emerging Asia’s worst performer last year – as Malaysia grapples with a recent slide in oil prices and falling exports.

There’s still no exciting stories coming out of Malaysia, and the coalition government appears still fragile

Alvin Tan, foreign exchange strategist

While Anwar has dismissed the alleged plots to bring down his administration, concerns over political stability prevail. The Southeast Asian country had seen four different premiers in as many years before Anwar rose to power in 2022.

“The Malaysian ringgit is cheap, no doubt, but there’s no catalyst for a revaluation shift,” said Alvin Tan, head of Asia FX strategy at RBC Capital Markets in Singapore. “There’s still no exciting stories coming out of Malaysia, and the coalition government appears still fragile.”

He expects the currency to slip about 2 per cent from Friday’s close to 4.75 versus the dollar in the first half of this year. In October, the ringgit slumped to nearly 4.8, the weakest since January 1998, the height of the Asian financial crisis.

Uncertainty over how incarcerated ex-premier Najib Razak’s application for a royal pardon would play out looms over the market. A six-member board headed by the Malaysian king will meet this month to decide on the matter, Singapore-based CNA reported.