Ringgit halts three-day decline after crude rallies overnight

[KUALA LUMPUR] Malaysia's ringgit snapped a three-day loss after an overnight rally in oil eased concern the country's fiscal position will worsen.

Brent crude climbed 2.2 per cent yesterday after Abdalla El- Badri, the secretary-general of the Organization of the Petroleum Exporting Countries, said prices would probably remain around US$45 to $50 a barrel. A 56 per cent plunge in crude to US$48.88 a barrel since June has weighed on the current account and state budget of Malaysia, Asia's only net exporter of oil, contributing to an 11 per cent slump in the ringgit.

"The ringgit is gaining because of the overnight increase in Brent," said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd in Singapore. "The Opec statement that oil prices will normalize also helps." The ringgit strengthened 0.1 per cent to 3.6155 a dollar as of 10:46 am in Kuala Lumpur, data compiled by Bloomberg show. It rose as much as 0.4 per cent to 3.6033 earlier. The currency touched 3.6277 yesterday, the weakest level since April 2009 and dropped 1.6 per cent over the past three days.

Prime Minister Najib Razak revised Malaysia's budget and growth forecasts on Jan 20 after cutting the oil price assumption to US$55 a barrel from $100. He raised the country's budget shortfall estimate to 3.2 per cent of gross domestic product this year from 3 pe rcent and trimmed the economic growth projection to 4.5 per cent to 5.5 per cent from 5 per cent to 6 per cent.

Inflation slowed to 2.7 per cent in December from 3 per cent in November, official data showed this week. The Southeast Asian nation will release foreign reserves figures for the first half of this month today after a Jan 7 report showed a 7.7 per cent decline to US$116 billion in December from the previous month.

Malaysia's 10-year government bonds gained. The yield on the notes due July 2024 fell one basis point, or 0.01 percentage point, to 3.97 per cent, according to data compiled by Bloomberg. The rate rose five basis points in the past three days.

BLOOMBERG