- Currency would be stronger if reflects fundamentals: Zeti
- Brent crude falls as much as 7 percent after Doha meeting
Malaysia’s ringgit fell the most in two weeks as Brent crude plunged after major oil producers failed to come up with an agreement to freeze output and address a supply glut.
The disappointment stemming from the weekend meeting in Doha risks reversing a rally in emerging Asia’s best-performing currency this year as a renewed decline in the commodity puts pressure on the government finances of oil-exporting Malaysia. Brent tumbled 2.7 percent to $41.92 a barrel as Iran appeared to be the main stumbling block to an agreement. Hopes a deal would be reached had spurred gains across world markets in recent days and driven Brent above $44 for the first time in four months.
“The ringgit’s near-term fortunes are heavily tied to oil-price developments,” said Khoon Goh, a senior currency strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “It really depends on whether oil prices can stabilize or continue to fall.”
The ringgit fell 0.6 percent to 3.9265 a dollar in Kuala Lumpur after being down as much as 1.5 percent earlier, according to prices from local banks compiled by Bloomberg. That pared its gain this year to 9.3 percent, trailing only Brazil’s real among emerging markets.
The ringgit “would be stronger” if it reflected Malaysia’s fundamentals, with the nation recording steady growth, low inflation and an improving fiscal position, central bank Governor Zeti Akhtar Aziz said in an interview in Washington on Saturday. The Southeast Asian economy will meet its 2016 expansion target of 4 percent to 4.5 percent even as risks to the global outlook mount and greater volatility may persist in capital flows, she said.
The International Monetary Fund warned last week that risks to global financial stability are rising as growth slows and commodity prices decline, which could lead to a stagnation in credit. The Washington-based lender lowered its 2016 global expansion forecast for the second time this year, to 3.2 percent from 3.4 percent, citing the impact of weak exports.
Other Asian exporters are already feeling the impact of slowing demand. Singapore reported Monday its non-oil shipments dropped the most in three years in March. The Monetary Authority of Singapore last week unexpectedly eased policy as economic growth ground to a halt.
Malaysian government bonds fell, pushing the 10-year yield up two basis points to 3.79 percent, data from Bursa Malaysia show.