Weaker ringgit due to falling oil prices: Chua

PETALING JAYA: The weakening of the ringgit is largely due to the impact of falling crude oil prices, said Deputy Finance Minister II Chua Tee Yong, brushing off reports that 1Malaysia Development Bhd's inability to service its RM2 billion debt was a factor to the extended drop in the ringgit against the dollar.
He said regionally, most currencies have weakened especially those that are in the oil exporting industry and in Malaysia, oil represents a good portion of income for government revenue.
"It used to be 40% (of government revenue) and has now dropped to 29% and this has bearing on the ringgit because ultimately, oil is one of the export items that contribute to the current trade surplus," he told reporters after the Hand Holding Retail Sector Programme here yesterday.
"This will be one of the major factors (for the weakening of ringgit) and that's the reason why you have the Russian currency and other currencies (of countries) that are oil exporting (also) dropping," Chua added.
He said when the ringgit weakens, exports will become more competitive and that exporters in Malaysia will have a boost to their bottom line. The weaker currency will also benefit the tourism industry.
"We believe the weakening of the ringgit is also being monitored by Bank Negara Malaysia (BNM)," said Chua.
The steady decline of ringgit had irked BNM which issued a statement to lenders, urging the selling of ringgit for US dollars must be backed by solid receipts and genuine business.
It was also reported that BNM's forex reserve had tumbled by about 4% in December 2014 in an apparent attempt to defend the ringgit. Nonetheless, BNM is of the view that ringgit fundamentals are strong and should revert back to its fair value.
The ringgit continued to trade at a five-year low, weighed down by a strengthening dollar. Yesterday, it stood at RM3.581 against the US dollar at 5pm.
On news reports yesterday that the Finance Ministry has directed government-linked companies to stop buying foreign assets for the time being, Chua said he has not received the information. "It is possible that we look into it because ultimately what is important is to stabilise the ringgit, which BNM is doing. In terms of currencies and trade, that would be monitored," he added.