Ringgit Drops as Oil Slide to Six-Year Low Dims Revenue Outlook

  • Brent declines ahead of OPEC meeting to discuss output cuts
  • Malaysian government bonds fall led by five-year notes

Malaysia’s ringgit fell after Brent crude’s slide to a six-year low dimmed prospects for Asia’s only major net exporter of oil.

The commodity has dropped 26 percent this year, helping make the ringgit the region’s worst-performing currency and threatening to derail government efforts to cut the budget deficit. Malaysia is also the world’s second-biggest producer of palm oil, leaving the country extra vulnerable to the slowdown in China.

“It’s the same old story with commodities, in particular oil, under pressure,” said Sue Trinh, Hong Kong-based senior currency strategist at Royal Bank of Canada. “That’s clearly a negative for the Malaysian ringgit.”

The ringgit weakened 0.3 percent to 4.2465 a dollar as of 9:40 a.m. in Kuala Lumpur, according to prices from local banks compiled by Bloomberg. It has weakened 18 percent in 2015.

Brent crude sank 4.4 percent overnight to $42.49 a barrel before Friday’s meeting of the Organization of Petroleum Exporting Countries, with the Iranian oil ministry’s Shana news agency saying some members disagree on the need for an output cut that may help prices recover.

Federal Reserve Chair Yellen reaffirmed on Wednesday that the U.S. economy is ready for the first increase in interest rates since 2006, with futures showing 72 percent odds for a move this month. She also provided greater clarity on the direction of policy once the central bank starts tightening.

Government bonds fell. The yield on notes due in 2020 rose six basis points to 3.89 percent, prices from Bursa Malaysia show. The 10-year yield climbed one basis point to 4.22 percent.

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