Ringgit Set for Best Weekly Rally Since 1998 as Oil Extends Gain

  • Asia stocks rise after minutes showed Fed not in rush to hike
  • Ringgit bolstered by better-than-expected trade data this week

The ringgit was poised for its biggest weekly advance since 1998 and stocks rallied as surging crude oil prices brightened prospects for Malaysia’s economy.

Asian shares rose on Friday and a gauge of the dollar fell after minutes of the Federal Open Market Committee’s latest meeting indicated the U.S. central bank won’t rush to raise interest rates. Brent crude extended gains after rising 3.4 percent on Thursday. Malaysia, Asia’s only major oil exporter, derives about 22 percent of state revenue from the commodity.

“I don’t think the Fed will give up hiking rates this year, but the FOMC minutes sound a little dovish to some” people, said Masashi Murata, vice president at Brown Brothers Harriman & Co. in Tokyo. “The higher oil price is also supporting the ringgit.”

The currency appreciated 2.4 percent to 4.1350 a dollar as of 10:07 a.m. in Kuala Lumpur, taking its gains for the week to 6.7 percent, according to prices from local banks compiled by Bloomberg. It earlier climbed to 4.1213, the strongest level since Aug. 21. The FTSE Bursa Malaysia KLCI Index advanced 1.1 percent on Friday and 5 percent from Oct. 2, headed for the biggest weekly gain since 2008.

Improved Sentiment

Negative sentiment toward emerging markets has abated since weaker-than-expected U.S. jobs data last week tempered speculation the Fed will tighten monetary policy by year-end. Odds of a Fed liftoff in 2015 have fallen below 50 percent, compared with 61 percent a week ago, futures data show.

While Fed officials noted the U.S. economy continues to improve, the committee decided to wait for additional data confirming the outlook for growth, the minutes showed yesterday. Officials cited increasing risks, mainly from China, while saying they were on track to increase rates this year.

Data this week showed Malaysian exports and the trade surplus exceeded economists’ estimates. Overseas shipments increased 4.1 percent in August from a year earlier while the trade gap widened to 10.2 billion ringgit ($2.5 billion), the highest in nine months. The median forecast of economists had been for a 1.3 percent gain in exports and a 4.1 billion ringgit surplus.

The ringgit still remains Asia’s worst-performing currency in 2015, with a 16 percent decline. Malayan Banking Bhd. cautioned against “complacent trades” in the ringgit as it’s likely to remain volatile amid lingering concerns about the outlook for emerging markets, analysts led by Singapore-based Saktiandi Supaat wrote in a report Thursday.

Sovereign bonds fell this week, with the 10-year yield rising three basis points to 4.17 percent, according to prices from Bursa Malaysia.

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