Ringgit Extends Gains as Rally in Oil Brightens Revenue Outlook

  • Malaysia derives 22% of income from oil-related sources
  • Bank of Singapore sees little reaction from rates, export data

Malaysia’s ringgit strengthened the most in more than a week as Brent crude rallied overnight to above $50 a barrel, brightening the outlook for Asia’s only major net oil exporter.

The ringgit gained along with other regional currencies on Wednesday as the Standard & Poor’s 500 Index of U.S. stocks climbed toward its record reached in May, with the positive sentiment rubbing off on Asian benchmarks. Brent crude has struggled to maintain breaks above $50 and is still down by more than half from its 2014 peak, helping make Malaysia’s currency one of the worst performing this year in emerging markets.

The ringgit strengthened 0.5 percent to 4.2645 a dollar in Kuala Lumpur, the most since Oct. 23, according to prices from local banks compiled by Bloomberg before the central bank meets to decide on its overnight policy rate on Thursday and Friday’s export data. It gained 0.4 percent on Tuesday.

“Higher oil prices and positive risk sentiment resulting from higher U.S. equities fueled the ringgit’s gains,” said Sim Moh Siong, a foreign-exchange strategist at Bank of Singapore Ltd. “I don’t think the OPR or export data will significantly drive the currency’s direction. ”

The FTSE Bursa Malaysia KLCI Index of shares rose 0.5 percent, adding to Tuesday’s 0.8 percent gain. While Brent crude climbed 3.6 percent overnight to $50.54, it was down 0.9 percent at $50.10 as of the close of local markets on Wednesday.

Policy makers will keep the benchmark rate at 3.25 percent, according to all 21 economists surveyed by Bloomberg, while exports likely increased 3.6 percent in September from a year earlier, a fourth monthly advance.

Malaysian government bonds due March 2019 climbed, with the yield declining six basis points to 3.59 percent, prices from Bursa Malaysia show. The 10-year yield rose one basis point to 4.15 percent. The cost to insure the nation’s sovereign debt using five-year credit-default swaps fell six basis points to 176, the lowest level since Sept. 18.

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