Malaysian ringgit, Singapore dollar plunge as Greenback soars on Fed rate hike hopes

US dollar makes significant gains after Fed comments, rising to a thirteen-and-a half-year high against a basket of major currencies.

Singapore dollar
People look at the exchange rate at a moneychanger displaying a poster of U.S. dollar bill, Chinese Yuan and Malaysia Ringgit in Singapore August 24, 2015. Reuters

The under-pressure Asian currencies, Malaysian ringgit and Singapore dollar, tumbled on Friday after US Federal Reserve chief Janet Yellen hinted at an imminent interest-rate hike.

Malaysian ringgit dropped further on Friday, hitting the 4.4030 mark against the greenback while the Singapore dollar was down 0.7 percent to US$0.7016 to the US dollar.

The US dollar made significant gains after the Fed comments, rising to a thirteen-and-a half-year high against a basket of major currencies.

Yellen did not clearly say if Fed would abnounce a rate revision at its December 13-14 policy meeting, she said a rate hike would happen "relatively soon."

"Markets are anticipating ... a fiscal package that involves a net expansionary stance of policy and that in a context of an economy that is operating reasonably close to maximum employment with inflation heading back to 2 percent," Yellen said.

In the last ten days after the surprise election of Donald Trump as US president, the Singapore dollar has tumbled more than 2.5 percent while the Malaysian ringgit slid more than 4.8 percent since the US election on November 8.

China weakened the yuan-dollar rate beyond landmark 6.8 level earlier this after the greenback surged. In Japan, the strength of US dollar brushed off positively on the Nikkei index as Japanese exporters were helped by a slide in yen.

In Malaysia, Bank Negara Malaysia (BNM) said it is taking measures to curb the volatility in the foreign exchange market. However market observers said this tone of reassurance from the central bank was not enough to stem the currency's slide.

"The question now is we need to see what the BNM can do to stabilize and strengthen the ringgit value against the US dollar. The selling pressure on the ringgit and the downtrend of other emerging currencies continues to happen because the US dollar is steadily strengthening," Mercury Security Sdn Bhd's Head of Research, Edmund Tham, told Bernama news agency.

"The situation must be examined and it is hoped the BNM will act on this, as there is nothing that the public can do," he added.

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