SINGAPORE: The Malaysian ringgit plumbed three-year lows on Wednesday after Fitch Ratings downgraded the country's credit outlook, leading losses among emerging Asian currencies before the result of the Federal Reserve's policy meeting and US growth data.
The ringgit fell as much as 0.6 percent to 3.2450 per dollar, the weakest since July 1, 2010, on dollar demand from custodian banks, traders said.
The ringgit recovered from early low to stand at 3.2430 per dollar by 0150 GMT, as investors were wary of possible intervention by the central bank to support the currency, though they described the market as fairly calm.
It is technically seen oversold with the 14-day dollar/ringgit relative strength index (RSI) at 70.9. A reading above the 70 threshold indicates the dollar is overbought against the ringgit.
Still, sentiment for the ringgit remains fragile after ratings agency Fitch cut its outlook on Malaysia's sovereign debt to negative on Tuesday citing darker prospects for reforms to tackle the country's rising debt burden.
"The negative sentiment around the ringgit still persists," said a foreign bank trader in Singapore.
"Any dips (recovery in the ringgit) will be shallow, unless today Ben becomes dovish," said the trader, referring to Fed Chairman Ben Bernanke.
The ringgit could weaken to 3.2600, the session low on July 1, 2010, he added.
Ten-year Malaysian government bond yields rose to 4.065 percent, the highest since late April 2011.
Investors were keeping an eye on redemption of maturing bonds with 9.2 billion ringgit ($2.9 billion) due during the day, according to central bank data.
Some currency traders said most outflows linked to the maturity had been completed.
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