Ringgit Gets No Reprieve as It Slides With Oil on Slowing China

  • Data shows trade surplus shrank more than forecast in July
  • Moody's says foreign-exchange reserve adequacy Asean's weakest

Malaysia’s ringgit fell for an 11th week in its longest stretch of losses since 1993 as lower energy prices weigh on the oil exporter’s earnings and capital flows out of emerging markets amid slowing Chinese growth.

The nation’s foreign-exchange reserves have fallen 18 percent this year, fueling speculation the central bank bought the ringgit to stem declines in Asia’s worst-performing currency. Data issued after the markets closed on Friday pointed to a slight pick up in the last two weeks of August. While a report earlier showed exports rose more than forecast in July, the decline in the trade surplus exceeded estimates. Malaysia’s benchmark stock index dropped this week and is down almost 10 percent in 2015, with a U.S. interest-rate increase likely to spur more outflows.

“For the ringgit, it has almost become a perfect storm,” said Mitul Kotecha, head of Asia Pacific currency strategy at Barclays Plc in Singapore. “The external position has come under focus. There are lower oil prices, weaker external demand and looming Federal Reserve rate hikes.”

The currency depreciated 1.4 percent in the past five days and 0.3 percent on Friday to 4.2585 a dollar in Kuala Lumpur, according to prices from local banks compiled by Bloomberg. It has weakened 18 percent this year and fell to a 17-year low of 4.2990 on Aug. 26.

Brent crude has halved in the past year, lowering government revenue for Malaysia, which derives 22 percent of its income from oil-related sources. Exports rose 3.5 percent in July from a year earlier, after advancing 5 percent the previous month, government data showed Friday. The trade surplus narrowed to 2.38 billion ringgit ($559 million) from 7.98 billion ringgit. Overseas shipments were expected to climb 3.2 percent, while the trade gap was seen at 6.3 billion ringgit, according to a Bloomberg survey.

Falling Reserves

Malaysia’s reserve holdings rose 0.2 percent to $94.7 billion in the two weeks to Aug. 28 from a six-year low of $94.5 billion in previous fortnight, the central bank reported on Friday. While the reserves remain sufficient, their adequacy is the weakest in the Association of Southeast Asian Nations, Moody’s Investors Service sovereign analyst Christian de Guzman said in an Aug. 27 briefing in Kuala Lumpur.

Government bonds advanced, with the 10-year yield falling 19 basis points this week and five basis points Friday to 4.21 percent, according to prices from Bursa Malaysia.

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