Ringgit rises a second day on resurgent oil as US dollar weakens

[KUALA LUMPUR] Malaysia's ringgit headed for its biggest two-day rally in three weeks as Brent crude surged overnight and the US dollar weakened on poor housing data, reinforcing bets the Federal Reserve won't raise interest rates anytime soon.

The ringgit traded just shy of an eight-month high as Brent climbed back above US$44 a barrel on Tuesday, a level it breached last week for the first time since December, and as China's economy shows signs of strengthening.

That provides some relief for the oil exporter's finances after the World Bank cut the nation's growth forecast. A measure of the greenback fell to a 10-month low as housing starts dropped more than expected, with futures showing only 16 per cent odds of a rate hike by June.

"It's the combination of a very dovish Fed and the improving growth outlook in China," said Mirza Baig, the head of Asia Pacific foreign-exchange and interest-rate strategy in Singapore at BNP Paribas SA.

"That's creating this context for a weak dollar and strong risk sentiment, and strength in the ringgit."

Malaysia's currency led gains in Asia. It rose 0.9 per cent to 3.8565 per US dollar as of 8:50 am in Kuala Lumpur, according to prices from local banks compiled by Bloomberg.

It touched 3.8503, just short of the August high of 3.8465 on April 13. It has once again overtaken the yen as the region's best performer this year, having advanced 11 per cent.

Brent rose 2.6 per cent to US$44.03 on Tuesday and reached a high for the day of US$44.50. While prices retreated 1.3 per cent in Asia on Wednesday to US$43.43, they are still above the year's average of US$36.41 and the 12-year low of about US$27 in January.

BLOOMBERG