- Malaysia loses 450 million ringgit for every $1 drop in oil
- Indonesia’s rupiah reverses declines to end 0.3 percent higher
Malaysia’s ringgit pared early losses as Asian shares rebounded and crude oil prices bounced back from their steepest decline in four months.
The ringgit ended down 0.2 percent at 4.0985 per dollar, after weakening as much as 1.8 percent to 4.1663 earlier, its lowest level since June 2, according to prices from local banks compiled by Bloomberg. The currency plunged 1.8 percent on Friday as the U.K.’s vote to leave the European Union deepened concern about the outlook for the global economy.
Leaders of Britain’s splintered government sought to reassure investors they’ll be able to navigate the fallout from the stunning vote to exit the EU as the pound extended its drop and international policy makers scrambled to respond. The MSCI Asia Pacific Index of equities rose 0.6 percent, erasing an earlier loss of as much as 0.3 percent. Brent crude was up 0.1 percent at $48.48 a barrel, after sinking 4.9 percent on Friday. As Asia’s only major net oil exporter, Malaysia loses 450 million ringgit ($109 million) for every $1 drop in oil. The nation derives about a fifth of its revenue from oil-related sources.
“Oil’s retracement did help,” said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group Ltd. in Singapore. “It’s still early days though and further volatility is likely,” he said, adding that the next near-term level for the ringgit is 4.15, followed by 4.1718, based on the 200-day moving average.
Malaysia’s benchmark share index ended 0.3 percent lower after retreating as much as 1 percent earlier. The yield on its 10-year sovereign debt fell four basis points to 3.87 percent, according to prices from Bursa Malaysia. The five-year yield dropped two basis points to 3.45 percent.
Indonesia’s rupiah closed 0.3 percent stronger at 13,340 a dollar, reversing an earlier drop of as much as 1.1 percent.
Markets will be driven by “money flight from emerging markets as a result of stronger investor conviction to shift into risk-off mode,” said Angus Salim Amran, Kuala Lumpur-based head of financial markets at RHB Investment Bank Bhd. “Downward pressure on commodity and oil prices - a breach of key $50 oil price resistance now remote -- will lead to continuing weakness in emerging market Asian currencies.”