Ringgit Falls for Fifth Day on Lower Oil, China Growth Concern

Updated on
  • Majority in Moody's poll see ringgit, energy stabilizing
  • Global funds cut Malaysian government bond holdings in August

Malaysia’s ringgit fell for a fifth day, the longest run of losses in a month, as an overnight decline in energy prices and an economic slowdown in China damped demand for the oil-exporting nation’s assets.

Brent crude slumped 4 percent on Monday, extending a decline that has contributed to a 19 percent depreciation in the ringgit this year in Asia’s worst performance. China, Malaysia’s biggest overseas market, reported on Tuesday its exports contracted for a second month in August, while imports shrank the most since May.

“There are uncertainties over China’s growth, declining oil prices, U.S. Fed rate normalization and global risk aversion,” said Leong Sook Mei, Southeast Asia head of global markets research at Bank of Tokyo-Mitsubishi UFJ in Singapore. “It’s a given that, in this kind of environment, Asian currencies will probably be very weak.”

The ringgit declined 0.2 percent to 4.3385 a dollar in Kuala Lumpur, according to prices from local banks compiled by Bloomberg. The currency, which has lost 4 percent in the past five days, earlier fell as much as 1 percent to 4.3730, the lowest since January 1998.

Yuan Expectations

The ringgit’s drop was due to expectations of a depreciation in the yuan after China reported a decline in foreign-exchange reserves on Monday, according to Dushyant Padmanabhan, a strategist with Nomura Holdings Inc. in Singapore.

A majority of more than 150 market participants surveyed by Moody’s Investors Service expect the ringgit and oil prices to stabilize, with 44 percent saying they expect the currency to trade between 4 and 4.50 a dollar, according to a statement from the rating company issued on Tuesday.

Global funds reduced holdings of Malaysian government bonds by 4.3 percent to 166.1 billion ringgit ($38 billion) in August from July, the lowest level in five months, according to central bank data.

Sovereign bonds retreated, with the 10-year yield rising two basis points to 4.26 percent, according to prices from Bursa Malaysia.