The Malaysian ringgit fell for the fourth straight day on Tuesday as the state-owned investment company 1Malaysia Development Bhd (1MDB) said it has defaulted on interest payments for the bonds it has issued.

The USD/MYR pair rose to 3.9388 on Tuesday from the previous close of 3.9035, translating to a 0.9% drop in the ringgit on the day.

The Malaysian unit had traded at an 8-month high of 3.8405 last week, from which the currency has now weakened 2.5%.

The company has not paid interest worth US$50mn U$1.75bn of dollar notes, which are co-guaranteed by Abu Dhabi's sovereign wealth fund International Petroleum Investment Co, with which the Malaysian firm has a dispute.

According to 1MDB, it has sufficient funds to pay the amount but it is not doing as it was the responsibility of the co-guarantor IPIC.

The deadline for the payment on behalf of the bonds maturing in 2022 was on Monday.

Currency experts said the 1MDB default is clearly a ringgit negative as it exposes contingent liability on the government as well as rating risks.

Against the Singapore dollar, the ringgit weakened more than 0.5% to 2.9058 from its close on Monday of 2.8885.

"Whilst 1MDB has the funds to have made the interest payment, it is 1MDB's position, as a matter of principle, that it was IPIC's obligation to do so," the company said. "Until IPIC accepts that all obligations have been met, 1MDB is obliged to withhold payments and will seek legal recourse and resolution."