[KUALA LUMPUR] Malaysia's ringgit climbed the most in six weeks and led gains in Asia as demand for the dollar waned after the Federal Reserve gave a clearer picture on the timing of its interest-rate increase.
The Fed's October minutes issued this week gave the strongest signal yet that the central bank will raise rates in December, with the wording for a gradual pace of future increases supporting demand for emerging-market assets. Brent crude stabilised after falling to a two-month low, helping boost sentiment for the ringgit. The Malaysian currency is the worst performer in Asia this year amid a slide in energy prices that's cut earnings for the region's only major net oil exporter.
"For the ringgit in particular, as an underperformer this year, it is a bigger beneficiary of reduced near-term pressure from Fed and China factors," said Dushyant Padmanabhan, a strategist with Nomura Holdings Inc. in Singapore.
The ringgit strengthened 1.9 per cent to 4.2648 a dollar as of 2.15 pm in Kuala Lumpur, according to prices from local banks compiled by Bloomberg. It rose to a two-week high of 4.2577 earlier and headed for the biggest five-day advance since Oct 9. Indonesia's rupiah advanced 0.9 per cent to 13,651 and Thailand's baht climbed 0.6 per cent to 35.659.
Michael Every, head of financial markets research at Rabobank Group in Hong Kong, said that despite the recovery, the ringgit will likely resume its weakening trend now markets have priced in Fed tightening as the focus shifts back to the factors weighing on Malaysia's outlook - general dollar strength, softness in commodities and potential declines in the Chinese currency.
In a move that could boost the ringgit, a report in the Edge newspaper Thursday cited Prime Minister Najib Razak as saying state-linked companies will repatriate 627 million ringgit (S$207.5 million) before year-end as a means to boost the economy through domestic investment.
The Bloomberg Dollar Index recorded its biggest drop in more than a month overnight after policy makers said in the Fed minutes released Wednesday that "it may well become appropriate" to raise the benchmark lending rate in December. Futures contracts show a 68 per cent chance of that happening, compared with 50 percent at the end of October.
Malaysian consumer prices rose 2.5 per cent in October from a year earlier, the least in four months and matching the median forecast in a Bloomberg survey, according to a government report Friday. The central bank will release data later in the day on foreign-exchange reserves, which have dropped 19 per cent this year to US$94 billion on speculation Bank Negara Malaysia intervened to support the ringgit.
Government bonds rose. The 10-year yield fell six basis points to 4.30 per cent, according to prices from Bursa Malaysia. The yield on the notes due 2020 declined two basis points to 3.78 per cent.