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Ringgit in longest losing streak since 1971 on capital outflows

Malaysia's ringgit gained the most in five months and the benchmark stock index closed at a six-week high after an overnight surge in Brent crude eased concern that finances will deteriorate for Asia's only major oil exporter.

[KUALA LUMPUR] Malaysia's ringgit rounded out its worst run of weekly losses in more than four decades as a drop in oil exacerbated the currency's decline amid capital outflows from emerging markets.

The currency fell for a 12th week, the longest stretch in Bloomberg data going back to 1971, as slowing Chinese growth and prospects of a US interest-rate increase sapped demand for developing-nation assets.

Bank Negara Malaysia will keep benchmark borrowing costs on hold at a meeting Friday, according to a Bloomberg survey, after data showed factory output beat estimates. The ringgit is Asia's worst-performing currency this year, weighed down by a political scandal involving Prime Minister Najib Razak.

"There's general negative sentiment toward emerging markets because of concerns about China and a potential Federal Reserve rate hike," said Dariusz Kowalczyk, a Hong Kong-based strategist at Credit Agricole CIB.

"There's also potential political instability domestically."

The ringgit dropped 1.4 per cent this week to 4.3175 a dollar in Kuala Lumpur, according to prices from local banks compiled by Bloomberg. It fell to 4.3798 on Thursday, the lowest level since January 1998 and is down 19 per cent this year. Brent crude declined 3.5 per cent from Sept 4 late in Asia, reducing government earnings for Asia's only major net oil exporter.

Global funds reduced holdings of Malaysian government bonds for a second month in August to the lowest level since March. They've sold a net RM16.4 billion (US$3.8 billion) of the nation's stocks so far this year, according to data from BIMB Securities Research in Kuala Lumpur.

Malaysia's exports contracted in four of the first seven months of this year as demand from China slowed. Bank Negara will keep the overnight policy rate at 3.25 per cent on Friday, according to 22 of 23 economists in a Bloomberg survey. One forecasts a 25-basis point increase. The decision is due at 6 pm local time.

The ringgit climbed as much as 1.2 per cent earlier on Friday, gaining along with other regional currencies, on speculation China's central bank intervened in the offshore yuan market in Hong Kong, Mr Kowalczyk said. It closed 0.4 per cent higher.

Malaysia's 10-year government bonds rose, with the 10-year yield falling two basis points on Friday to 4.18 per cent, according to prices from Bursa Malaysia.