Ringgit Slumps as Emerging Markets Lose Appeal on IMF Growth Cut

  • Data show June consumer-price gains slowest since March 2015
  • ‘Conservative’ move away from high-yielders, Oanda says

Malaysia’s ringgit posted its biggest three-day drop in more than two months after the International Monetary Fund cut its world growth forecast, dimming the appeal of emerging-market assets.

The ringgit led losses among developing-nation currencies on Wednesday amid rising demand for the dollar as traders revisited bets for a Federal Reserve rate increase by December following strong housing and retail-sales data. Malaysia lowered borrowing costs last week for the first time in seven years. Brent crude has fallen 1.8 percent so far this week, clouding the outlook for Malaysia as Asia’s only major net oil exporter.

“There’s a little move away from high-yielders into a more conservative basket,” said Stephen Innes, a senior trader at Oanda Asia Pacific Pte Ltd. in Singapore. “Overall, it’s a soft spot in regional risk appetite. Crude prices have continued to weigh negatively.”

The ringgit depreciated 0.6 percent to 4.0275 per dollar in Kuala Lumpur, taking its three-day loss to 2 percent, prices from local banks compiled by Bloomberg show. It earlier reached 4.0428, the lowest level since July 8. The Bloomberg Dollar Spot Index rose for a fourth day as bets for a Fed rate increase by December climbed to 43 percent from 9 percent at the end of June.

Slowing Inflation

The FTSE Bursa Malaysia KLCI Index of shares fell 0.1 percent, extending its retreat from the highest close on Monday since April 29. Brent crude hovered below $47 a barrel.

Malaysian inflation data on Wednesday backed the case for another rate cut in the coming months. Consumer prices increased 1.6 percent in June from a year earlier, continuing a slowing trend since reaching a seven-year high of 4.2 percent in February, government data showed.

The yield on 10-year government bonds rose five basis points to 3.64 percent, according to prices from Bursa Malaysia. The three-year yield advanced nine basis points to 2.89 percent after reaching 2.80 percent on Tuesday, the lowest for a benchmark of that maturity since 2009.

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