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Ringgit leads declines in Asia as oil dictates currency's moves
[KUALA LUMPUR] Oil prices continue to dictate moves in the Malaysian ringgit, which dropped the most in Asia after rallying on Thursday on an agreement by Russia and Saudi Arabia to freeze output to shore up prices.
While the currency is proving more resilient to a decline in energy prices this year than last, when it slumped by the most since 1997, oil's direction remains a concern after the government said it risks losing 300 million ringgit (S$100 million) for every US$1 drop in the commodity. Fuel costs fell on Friday after an increase in US inventories added to a global supply glut and the pledge by the oil producers failed to bring any long-lasting relief to the market.
"Growing US oil inventories overnight tempered sentiment," said Christopher Wong, a Singapore-based senior foreign-exchange analyst at Malayan Banking Bhd. "That's exerting some pressure on the ringgit." The currency weakened 1.1 per cent to 4.2137 a dollar as of 10:02 am in Kuala Lumpur, breaking through its 20-day moving average of 4.2105, suggesting further weakness, according to prices from local banks compiled by Bloomberg. It fell for a third week, trimming this year's gain to 1.9 per cent after a 2015 loss of 19 per cent.
Brent crude dropped 1.1 per cent in Asia after falling 0.6 per cent in New York. As the region's only major net oil exporter, Malaysia derives about 22 per cent of state revenue from oil-related sources. Data on Thursday showed the economy expanded at the slowest pace in two years last quarter.
Ten-year government bonds fell, with the yield rising one basis point to 3.93 per cent, prices from Bursa Malaysia show.