The New Zealand dollar and Malaysian ringgit dominated the headlines during Thursday’s Asian session; both for disappointing reasons.
Holders of New Zealand dollars had to watch their currency drop more than a percent against the US dollar in the hours following the meeting of the Reserve Bank of New Zealand, to just 69.1 cents – a five-month low. And against its closest cousin, the Australian dollar, the kiwi is having its worst day since October. The kiwi fetched only 92.5 Australian cents when last seen – its weakest level in ten weeks.
After leaving the official cash rate at a record low of 1.75 percent, the RBNZ further removed itself from what has become a global trend among central banks towards monetary policy tightening. Not only will New Zealand’s interest rates stay as they are “for some time to come,” per the bank’s statement, a rate cut is as likely as a hike.
“The direction of our next move [in interest rates] is equally balanced, up or down; only time and events will tell,” the bank said.
Sending Malaysia’s currency, the ringgit, sharply lower on Thursday was news of a monumental power shift in the Southeast Asian nation.
After sixty years in power, the incumbent Barisan Nasional coalition, led by Prime Minister Najib Razak, has fallen to the Mahathir Mohamad-led Pakatan Harapan alliance, which has secured at least 113 of the 222 contested seats according to reports. The Financial Times touted the news as a “victory for Asian democracy.”
Najib was a strong favourite to win another term as Prime Minster but has been plagued by allegations of corruption, including that centred around the 1MDB scandal. At 92 years of age, Mahathir will become the world’s oldest elected leader.
Investors generally despise political drama, and with that said, approaching the end of the business day in Sydney, the ringgit, which had averaged 3.9 per US dollar this year and which rarely moves more than 0.5 percent in a day, was nearly 4 percent lower than pre-election levels at 4.14 – its weakest level in five months.