Ringgit Shrugs Off Lower Oil to Strengthen Before Policy Review

  • Brent crude extends drop after reaching 12-year low Wednesday
  • Most of negative news on oil already priced in: Hong Leong

Malaysia’s ringgit rallied even as oil resumed its decline before a policy review at which the central bank is forecast to hold its benchmark interest rate.

Brent crude gave up earlier gains to trade lower after sinking overnight to the weakest level since 2003, putting further pressure on the finances of the region’s only major net oil exporter. Bank Negara Malaysia will keep its benchmark interest rate at 3.25 percent for a ninth straight meeting, according to all 20 economists in the Bloomberg survey. The decision is due at 6 p.m. local time.

“We have been seeing a lesser impact from oil on the ringgit,” said Choong Yin Pheng, senior manager for bonds and economic research at Hong Leong Bank Bhd. in Kuala Lumpur. “Most of the negative news has already been priced in. There’s also the belief that oil prices at this level are already very low and people are seeing there shouldn’t be much downside from here.”

The ringgit strengthened 0.3 percent to 4.3818 a dollar in Kuala Lumpur, paring its loss this year to 2 percent, according to prices from local banks compiled by Bloomberg. It plunged 19 percent in 2015 in the biggest drop since 1997 as a 35 percent slump in Brent crude damped Malaysia’s economic outlook.

Rate Meeting

Malaysian monetary policy is already accommodative and the nation also needs other policies to support growth, Governor Zeti Akhtar Aziz said in Hong Kong on Monday. The central bank is unlikely to lower interest rates this year as the balance of economic risks is tilted toward growth, Tim Condon, head of research at ING Groep NV in Singapore, wrote in a research note on Thursday.

Ten-year sovereign bonds rose, pushing the yield down four basis points to a five-month low of 4.02 percent, according to prices from Bursa Malaysia. The yield on the notes due 2020 was steady at 3.37 percent.

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