Malaysian ringgit drops most in Asia this week as crude declines

[KUALA LUMPUR] Malaysia's ringgit was poised for a third week of losses as oil prices slumped before US data that may provide clues on when the Federal Reserve will tighten policy.

The currency led declines in Asia as a 5.2 per cent drop in Brent crude this week weighed on the outlook for Malaysia, which derives 22 per cent of state revenue from energy-related sources. The country's exports contracted 5.5 per cent in April from a year earlier and the trade surplus narrowed, according to a Bloomberg survey before data due Friday.

The ringgit depreciated 1.2 per cent from May 29 and 0.4 per cent on Friday to 3.7132 a dollar as of 9:42 am in Kuala Lumpur, data compiled by Bloomberg show. It touched a seven-week low of 3.7175 on Friday and has dropped 4 per cent over the last three weeks.

"Malaysia is the most exposed to lower commodity prices, in particular oil," said Sue Trinh, a senior currency strategist at Royal Bank of Canada in Hong Kong. "With the Greece negotiations getting pushed back, that should see payrolls as the key driver of markets." Employers in the US probably added more jobs in May than April, a Bloomberg survey shows before data due Friday, which would support the case for the Fed to move closer to raising interest rates. Greece told the International Monetary Fund on Thursday it would delay a debt payment of about US$339 million due Friday, submitting a request to bundle payments due this month into one lump sum.

Malaysian sovereign bonds fell, pushing the 10-year yield up 13 basis points this week and six basis points on Friday to 4.04 per cent, data compiled by Bloomberg show. The government will offer 3 billion ringgit (S$1.09 billion) of notes due 2025 on Friday, with bidding to close at 11:30 am local time.

BLOOMBERG