[KUALA LUMPUR] Malaysia's ringgit rose the most in a month, supported by rebounding oil prices and signs the pace of US interest-rate increases will be gradual once they start in December.
Brent crude extended its recovery from a three-month low after a report showed oil stockpiles in Saudi Arabia fell from a record. That's brightened the outlook for Malaysia, which is Asia's only net exporter of the commodity and derives 22 per cent of government revenue from oil-related sources. State-linked companies will repatriate 627 million ringgit (S$205 million) before year-end as a means to boost the economy through domestic investments, the Edge newspaper reported Prime Minister Najib Razak as telling parliament.
The ringgit strengthened one per cent to 4.3440 a dollar in Kuala Lumpur, the biggest gain since Oct 23, according to prices from local banks compiled by Bloomberg. It climbed to 4.3250 earlier, the strongest in more than a week.
"The drop in Saudi oil inventories and airstrikes against Islamic State that could potentially disrupt supply further mean that upside risks to oil prices are beginning to seep in," said Vishnu Varathan, a Singapore-based economist at Mizuho Bank Ltd.
"With the rate hike for December baked in to a large extent, some investors are also paring dollar debt to try to hedge both the foreign-exchange exposure and the rate moves." The Federal Reserve indicated it will most likely raise rates next month, with the October minutes issued on Wednesday showing the future trajectory will be at a guarded pace. A gauge measuring the greenback against 10 major currencies retreated on Thursday by the most this month and US Treasuries fell overnight.
Oil stockpiles in Saudi Arabia dropped to 322.7 million barrels in September from 326.6 million in August that was the highest since at least 2002, according to data published Wednesday on the website of the Riyadh-based Joint Organisations Data Initiative. Brent crude climbed 0.3 per cent on Thursday to US$44.39 a barrel.
While the price of the commodity is rising, it is still down by more than half from a 2014 peak. That's weighed on the ringgit, which has fallen 20 per cent this year in Asia's worst performance and spurred capital outflows.
Malaysia's government bonds were mixed. The five-year yield climbed three basis points to 3.81 per cent while the three-year yield declined six basis points to 3.61 per cent, data from Bursa Malaysia show.