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The decision of Bank Negara to maintain the Overnight Policy Rate at 3.5% resulted in the Ringgit Malaysia reacting in the worst possible manner.

The Ringgit today plunged to a 9-month low against the Singapore Dollar and 10-month low against the US greenback. Already hurt by the knock-on effect from the Dow Jones and the political uncertainty in Malaysia caused by today’s Permatang Pauh elections, the decision not to raise interest rates only exacerbated its decline.

Now may be a good time to hold on to your foreign currency or look into investing in gold as inflation is set to rise.

SINGAPORE: The ringgit fell to a nine-month low against the dollar on Tuesday, hurt by the central bank’s decision to leave rates on hold despite rising inflation.

Some traders suspected the central bank, Bank Negara Malaysia, was selling dollars to put a floor under the ringgit which fell as low as 3.388 per dollar.

“CPI is so high but they haven’t done anything to contain the inflation while other central banks in Asia are hiking rates,” said one trader in Kuala Lumpur.

“And there is the Anwar election today. A lot of event risk,” he said.

He was referring to Tuesday’s by-election that opposition leader Datuk Seri Anwar Ibrahim is contesting as he seeks to return to parliament.

Annual inflation in Malaysia hit an almost 2-year high of 8.5% in July, but the central bank has left overnight rates steady at 3.5% at 19 consecutive policy reviews, including Monday’s meeting. — Reuters