The Malaysian ringgit has fallen back near the six-year low it hit two months ago despite a weakening dollar as the concerns of the sovereign investment company 1MDB remain escalated.
On Friday, USD/MYR rose to as high as 3.7166, its highest since mid-April, from the previous close of 3.7015. The pair had traded as high as 3.7381 on 20 March, its highest since March 2009, and almost equalled that level with a 3.7247 on 15 April.
Malaysia must resolve 1Malaysia Development Berhad's (1MDB) debt issue or risk a negative chain of events, second finance minister Datuk Seri Ahmad Husni Hanadzlah had said on Wednesday.
If the country has to find RM42bn to pay back the troubled company's debt in addition to the budgeted RM52bn of development expenditure for next year, then the fiscal deficit will shoot up to 4% from the target of 3.2%, according to the minister.
The ringgit could fall to Asian crisis levels when the USD/MYR pair had risen above 4.0 and the country could face rating downgrades if the debt issue is not solved, he added.
The Malaysian currency has fallen 1.37% so far this month, adding to the 2.8% loss happened in May.
In April, the unit had made a good reversal, moving off the 6-year low in March, and had hit a 3-month high of 3.5315, but now these gains have been erased almost entirely.
Technically, the USD/MYR pair has strong resistance near the 3.75 area which it failed to break through in March. In 2009 too, the attempt to break above that region failed at 3.7550. So breaking that level will push the ringgit to its lowest since early 2006.
Charts also show that the chances for the ringgit plunging to a nine-year low remain technically strong as long as the USD/MYR pair holds above the 3.65 region.
Since the incorporation in 2009, 1MDB has been in news for wrong reasons, and the accumulated debt has now weakened the country's financial health by a significant level.
In May, Moody's Investors Services said government support of 1MDB could jeopardise Malaysia's sovereign credit rating.
The market is now waiting for Malaysia's April trade balance figures due later in the day. The consensus is for the surplus to have dwindled to RM5.7bn from RM7.82bn recorded in March.
In addition, the dollar will move broadly on the US non-farm payrolls later in the US session, and if the move is a reversal of its recent losses, then that will worsen the ringgit's chances to fight back.
The USD index had fallen to a two-week low of 94.66 on Thursday before rebounding to 95.66 by early Friday.
Better than expected weekly jobless data released in the previous session has been supporting the greenback now and any positive surprise in the NFP numbers could push it through the resistance barrier at 96.13 eventually reversing this week's losses entirely.