Ringgit extends worst start since 2009 as oil slump hits revenue

[KUALA LUMPUR] Malaysia's ringgit extended its worst start to a year since 2009 as a slump in Brent crude clouds the outlook for Asia's only major net oil exporter just as uncertainty over China rattles global markets.

Brent has slumped to an 11-year low and prompted Prime Minister Najib Razak to review the 2016 annual budget. Plantation Industries and Commodities Minister Douglas Uggah Embas said last week that Malaysia risks losing RM300 million (S$98 million) for every one dollar drop in oil. Moody's Investors Service cut the nation's credit outlook on Monday to stable from positive, citing the impact on government revenue.

The currency snapped a two-day gain and dropped 0.5 per cent to 4.4030 a dollar as of 12.49pm in Kuala Lumpur, prices from local banks compiled by Bloomberg show. That took its decline in 2015 to 2.5 percent after last year's worst annual loss in Asia.

"Falling crude oil prices and uncertainty involving the slowdown in China are weighing on the ringgit," said Zulkiflee Mohd. Nidzam, head of foreign exchange and bond trading at Kuala Lumpur-based Asian Finance Bank Bhd. "If these persist, the ringgit could weaken further to 4.45 a dollar in the near term."

Since Moody's assigned a positive outlook in November 2013 the government has sought to improve its finances, rationalizing fuel subsidies and putting in place a goods and services tax, the ratings company said on Monday. But the impact on the balance sheet has been limited and will remain so, in part due to changes in the external environment, it said.

BLOOMBERG