Falling oil weighs on ringgit as Fed interest-rate rise looms

NOV 30, 20156:31 PM

[KUALA LUMPUR] Malaysia's ringgit fell for a third day after oil prices declined and the dollar rallied before a likely increase in US borrowing costs.

A gauge of the greenback's strength rose for a fourth day as futures contracts showed a 74 per cent chance of a Federal Reserve interest-rate increase next month, while the European Central Bank is seen boosting monetary stimulus. The ringgit, Asia's worst performer this year amid a 22 per cent drop in Brent crude and a political scandal involving Prime Minister Najib Razak and state investment company 1Malaysia Development Bhd, advanced last week after the debt-ridden firm struck a deal to sell its power assets.

"The ringgit has weakened on the back of a stronger US dollar, with a retreat in oil prices also weighing," said Khoon Goh, a senior foreign-exchange strategist at Australia & New Zealand Banking Group Ltd in Singapore. "There was also likely profit-taking following last week's rally in the ringgit on news of 1MDB's power asset sale." The ringgit fell 0.1 per cent to 4.2640 a dollar in Kuala Lumpur and dropped to 4.2913 earlier, the lowest since Nov 24, according to prices from local banks compiled by Bloomberg. It strengthened 0.8 per cent in November, a second month of gains, paring its loss this year to 18 per cent.

1MDB said it will sell its power assets to China General Nuclear Power Corp. for 9.83 billion ringgit (S$3.2 billion), bringing it a step closer to winding down operations after its mounting debt raised investor concern. The Malaysian company, whose advisory board is headed by Prime Minister Najib, announced plans in February to dismantle its assets after it drew criticism from lawmakers for accumulating around 42 billion ringgit of debt in less than five years of existence.

Foreign funds have pulled 18.4 billion ringgit from Malaysian stocks this year, compared with 6.9 billion ringgit of outflows for the whole of 2014, according to a report Monday from Kuala Lumpur-based MIDF Amanah Investment Bank. Overseas investors have sold a net 16.2 billion ringgit of the nation's debt in 2015, central bank data show.

Government bonds advanced, pushing the yield on the notes due September 2025 down three basis points to 4.20 per cent, according to prices from Bursa Malaysia.

BLOOMBERG