– This is the script of CNBC's news report for China's CCTV on August 17, Monday.
Welcome to CNBC Business Daily, I'm Qian Chen.
The price of U.S. crude skidded to its lowest level in almost six and half years on Friday as fears of global oversupply and weakness in Asian economies continued to mount.
Vast stockpiles and refinery shut downs only served to increase the glut concerns and, as the price continues to fall, emerging market economics particularly sensitive to the commodity are coming under pressure.
The latest casualty of the price slump last Friday was the Malaysia's ringgit, which tumbled to a 17-year low as the oil price drop and political turmoil sparked capital outflows.
As a major oil exporter, with crude accounting for close to a third of government revenues, there are rising concerns that slumping oil prices will continue to dent economic growth in Malaysia.
[CLAUDIO PIRON BofA Merrill Lynch Co-head of Asia FX research] "Clearly, we are following commodity prices, you particularly see last week, and you see this week as well, is that if oil prices continued to lag lower, then dollar-ringgit will follow suite quite significant, until we see the stabilization in the oil price."
Besides the declining global oil prices, the currency has also been hit by a toxic brew of expectations the U.S. Federal Reserve will hike interest rates later this year, a development likely to spur outflows from emerging markets, as well as a corruption scandal involving the prime minister.
[Khoon Goh, Senior FX Strategist, ANZ]I"n the case of Malaysia, there are certainly domestic factors that play, the local political developments have turned sentiment negative against the Malaysian assets, that's why the ringgit is hitting multi-year lows. it's hard to see how it's gonna turn around unfortunately."
The currency is now hovering around its weakest levels since 1998, during the Asian Financial Crisis when capital controls were imposed in Malaysia in September 1998.
If we take a look at the currency chart, it does look like a deja vu.The central bank, Bank Negara Malaysia (BNM), has been intervening in the market to support the currency, but analysts said those efforts may be stumbling.
Others are also worried about the use of reserves to support the currency.
In addition, foreigners hold nearly 49 percent of Malaysian government securities, and while foreign investers were net buyers in the second quarter, reversing those portfolio flows could easily overwhelm the country's current account surplus, it said.
On the other hand, Malaysia is not the only emerging market to feel the pain of the oil price drop, with fellow commodity currencies, the Brazilian real, the Russian rouble and the Colombian peso all slumping against the U.S. dollar in recent weeks.
CNBC's Qian Chen, reporting from Singapore.