Ringgit leads gains in asia; foreigners snap up Malaysian bonds

[KUALA LUMPUR] Malaysia's ringgit led an advance in Asian currencies as oil rallied for a third day and Federal Reserve minutes released overnight emphasized a gradual approach to raising interest rates.

Brent crude rose above US$40 a barrel after US inventories unexpectedly dropped from the highest level in over eight decades, auguring well for Malaysia, which derives about a fifth of its revenue from oil-related sources.

The Fed minutes showed officials are concerned about the impact of global economic and financial risks on the economy, suggesting a rate increase this half is unlikely. Foreigners pumped the most money into Malaysian bonds in almost two years last month, central bank data released Thursday showed.

The ringgit strengthened 0.5 per cent to 3.8985 a US dollar as of 1:04 pm in Kuala Lumpur after being up as much as 1.2 per cent earlier, according to prices from local banks compiled by Bloomberg. The currency has advanced 10 per cent this year in the best emerging-market performance. A gauge of the greenback's strength fell the most in a week overnight.

"The ringgit has benefited from a bounce in oil prices and a weaker US dollar," said Khoon Goh, a senior currency strategist at Australia & New Zealand Banking Group Ltd in Singapore.

"With the Federal Open Market Committee minutes affirming the Fed's cautious stance, the dollar stayed soft."

Malayan Banking Bhd, the nation's biggest lender, said Tuesday the ringgit may reverse its gains in the next two to three weeks and drop to 3.9970 before an April 17 meeting of the Organization of the Petroleum Exporting Countries.

Bond Inflows

Overseas investors raised their holdings of Malaysian sovereign and corporate debt by 5.3 per cent to 226.6 billion ringgit (S$78 billion) in March, according to central bank data released on Thursday. That was the biggest increase since May 2014 and holdings are at the highest level since Nov 2014.

A risk-on mood toward emerging-market assets and a 7.8 per cent advance in the ringgit last month spurred inflows, said Winson Phoon, a fixed-income analyst at Maybank Investment Bank Bhd in Kuala Lumpur.

Sovereign bonds declined, pushing the 10-year yield up one basis point to 3.81 per cent, according to prices from Bursa Malaysia. The yield fell 14 basis points last month.

BLOOMBERG