Ringgit extends drop on risk appetite soft spot as stocks fall

[KUALA LUMPUR] Malaysia's ringgit headed for its biggest three-day loss in more than two months as appetite for emerging-market assets waned after the International Monetary Fund cut its world growth forecast.

Developing-nation currencies have retreated this week amid strength in the US dollar as better-than-expected US data on retail sales, housing and employment prompted traders to revisit bets for a Federal Reserve rate increase this year.

That puts it at odds with Malaysia, which lowered borrowing costs last week for the first time in seven years. The failed coup in Turkey last Friday has done little to support investor sentiment, with oil prices down almost 2 per cent this week.

"There's a little move away from high-yielders into a more conservative basket," said Stephen Innes, a senior trader at Oanda Asia Pacific Pte Ltd in Singapore.

"Overall, it's a soft spot in regional risk appetite. Crude prices have continued to weigh negatively."

The ringgit depreciated 0.6 per cent to 4.0270 per US dollar as of 9:30 am in Kuala Lumpur, taking its three-day loss to 2 per cent, prices from local banks compiled by Bloomberg show. The Bloomberg Dollar Spot Index rose the most in two weeks on Tuesday, when Brent crude dropped 0.6 per cent to trade below US$47 a barrel.

Malaysian inflation data on Wednesday may back the case for another rate cut in the coming months. Consumer prices increased 1.8 per cent in June from a year earlier, continuing a slowing trend since reaching a seven-year high of 4.2 per cent in February, according to the median estimate of economists before the noon release.

BLOOMBERG