- Lower oil prices hurt outlook for Malaysia’s export revenue
- Currency retreats as improved U.S. economic data boost dollar
Malaysia’s ringgit posted its biggest weekly drop in 10 months as lower crude oil prices and the fallout from a controversy involving a state investment firm sapped demand for the nation’s assets. Bonds rose.
The currency declined as Brent crude’s 2.6 percent decline in five days clouded the outlook for the oil-exporting country’s revenues, and after a slew of better-than-expected U.S. data boosted demand for the dollar. Authorities in Singapore and the U.S. moved to seize assets linked to alleged fraud involving 1Malaysia Development Bhd., the latest chapter in the troubled company’s woes that contributed to the ringgit’s biggest annual drop since 1997 last year.
“The market is now looking at pricing in a higher probability of a rate hike by the Fed this year,” said Irene Cheung, a foreign-exchange strategist in Singapore at Australia & New Zealand Banking Group Ltd. Oil prices have affected the ringgit and the latest developments on 1MDB may have “an impact on the political front, which we don’t know how it will work out and how serious it is,” she said.
The ringgit fell 0.4 percent Friday, and 2.7 percent this week, to 4.0570 per dollar in Kuala Lumpur, according to prices from local banks compiled by Bloomberg. The 5-day decline is the biggest since the period ended Sept. 25.
More than $3.5 billion was misappropriated from 1MDB, and about $1 billion was laundered through America’s banking system, the U.S. Justice Department said in filings Wednesday. The Monetary Authority of Singapore said Thursday it seized S$240 million in assets from individuals linked to alleged fraud at 1MDB. The Malaysian government said it will cooperate with lawful investigations of local companies or its citizens.
Futures show a 45 percent chance of the Federal Reserve increasing interest rates by December, compared with 9 percent at the end of June, after data on retail sales, housing and employment in the U.S. beat economists’ estimates.
Government bonds rose Friday, pushing the yield on 10-year notes down three basis points to 3.65 percent, according to prices from Bursa Malaysia. The yield ended a five-day advance and was up eight basis points from a week ago.