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Malaysian foreign-exchange reserves edge up as ringgit rebounds

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Malaysia's foreign-exchange reserves rose following last quarter's biggest decline since 2008, a sign the central bank stepped back from the market as Asian currencies rebounded on receding bets for higher U.S. interest rates.

[KUALA LUMPUR] Malaysia's foreign-exchange reserves rose following last quarter's biggest decline since 2008, a sign the central bank stepped back from the market as Asian currencies rebounded on receding bets for higher U.S. interest rates.

The holdings climbed US$800 million in the two weeks to Oct 15 to US$94.1 billion, according to a Bank Negara Malaysia statement issued after local markets closed Thursday. The reserves fell by US$12.2 billion last quarter to the lowest level since August 2009 amid the steepest three-month slump in the ringgit in almost 18 years.

The ringgit is headed for its first monthly advance since April and is rallying along with other emerging-market currencies as interest-rate futures show only 32 per cent odds for a hike in US borrowing costs by December. The ringgit is still Asia's worst performer this year as a plunge in Brent crude hurts the region's only major net oil exporter.

Prime Minister Najib Razak will announce measures to strengthen the currency in Friday's budget, Trade Minister Mustapa Mohamed said in parliament Tuesday.

The reserves as of Oct 15 were enough to finance 8.8 months of retained imports and are 1.2 times Malaysia's short- term external debt, according to the central bank's statement on Thursday.

The ringgit fell 0.2 per cent to close at 4.2863 a dollar in Kuala Lumpur on Thursday, according to prices from local banks compiled by Bloomberg. While it's climbed 4.5 per cent from a 17- year low in September, the currency has dropped 18 percent this year as Brent crude more than halved from its peak in June 2014.

Central bank Governor Zeti Akhtar Aziz pledged in August to rebuild the reserves after they dropped below the $100 billion mark in July for the first time since 2010. Both Zeti and Najib have said there's no plan to revisit capital controls imposed during the Asian financial crisis, when the ringgit was pegged at 3.8 a dollar in 1997 through to July 2005.

"The decline in the foreign reserves will probably continue," Emily Dabbs, an economist at Moody's Analytics Australia Pty Ltd. in Sydney, said before the data was released. "However, given the decline in the ringgit and the pressure that's putting on the foreign reserves, it's unlikely that the central bank will be able to continue its level of intervention in the currency market."

BLOOMBERG