May 20 (Bloomberg) -- Malaysia's ringgit fell, extending a four-week slump, on speculation turmoil in the ruling coalition will limit the government's ability to manage the economy. Bonds were little changed.
The ringgit traded near the lowest since January after former premier Mahathir Mohamad yesterday quit United Malays National Organisation, the dominant party in the ruling National Front coalition in a no-confidence move against Prime Minister Abdullah Ahmad Badawi. Benchmark three- and 10-year bond yields were at the highest in four months.
``Investors have been uncomfortable with the political situation and this has weakened the ringgit,'' said Lee Cheng Hooi, an analyst at MIMB Investment Bank Bhd. in Kuala Lumpur. ``Foreigners are backing off.''
The ringgit traded at 3.2450 per dollar as of 5:15 p.m. in Kuala Lumpur versus 3.2330 on May 16, according to data compiled by Bloomberg. The currency has weakened 3.5 percent since reaching a decade-high of 3.1270 on April 24. Financial markets were shut yesterday for a public holiday.
Standard & Poor's on May 15 cut the nation's rating outlook to ``stable'' from ``positive,'' saying political uncertainties and weaker fiscal positions have diminished the short-term prospect for a rating upgrade.
Mahathir's move may weaken Abdullah's position and destabilize the country, thereby boosting the dollar, Ideaglobal in Singapore wrote in a report today.
Three-year notes were little changed following two weeks of losses before a government report tomorrow that economists surveyed by Bloomberg News said will show consumer prices rose 3 percent in April from a year ago, the most since February 2007.
The yield on the 3.833 percent bond was at 3.51 percent, according to Bursa Malaysia Bhd.'s electronic bond exchange. The price dropped 0.01, or 10 sen per 1,000 ringgit face amount, to 101.01.
By David Yong
Bloomberg
20/05/08
PEOPLE'S POWER
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