Ringgit gains for a fifth week as oil rebound eases revenue woes

[KUALA LUMPUR] Malaysia's ringgit rose for a fifth week in its longest run of gains since July as a rebound in Brent crude eased concern that government revenue will deteriorate for Asia's only major oil exporter.

The currency climbed to a two-month high Friday as Brent advanced in New York trading and Bank Negara Malaysia Governor Zeti Akhtar Aziz ruled out the need to cut interest rates. The ringgit has swung from Asia's worst-performing currency to the region's best since the end of March as crude rallied 17 per cent. Fitch Ratings has warned that the nation is at risk of a credit downgrade, citing Malaysia's public finances.

"Oil prices are higher and that's good for the ringgit," said Vishnu Varathan, a senior economist at Mizuho Bank Ltd. in Singapore. Ms Zeti's comments would be supportive of the currency "at the margin," he said.

The ringgit appreciated 1.1 per cent Friday and from April 17 to 3.5850 a dollar as of 1:58 pm in Kuala Lumpur, according to data compiled by Bloomberg. It earlier rose to 3.5820, the strongest level since Feb 26, and has climbed 3.3 per cent since March 31, trimming 2015's loss to 2.5 per cent.

The currency dropped 5.6 per cent in the first quarter as Brent fell to a six-year low of US$45.19 a barrel. The commodity has since rebounded to US$64.55.

Governor Zeti said last week that the ringgit was undervalued and the current level of borrowing costs is accommodative. "The ringgit has not been taken into consideration in our interest-rate policy," Ms Zeti said in a Bloomberg interview in Kuala Lumpur Thursday. "We look at the risks to inflation and the risks to growth. And we also look at the risks of destabilizing financial imbalances."

Malaysia's economy is on a "steady growth path," Ms Zeti said, reiterating this year's economic growth forecast of 4.5 per cent to 5.5 per cent. Inflation accelerated to 0.9 per cent in March from a year earlier, compared with the 0.1 per cent increase the previous month, official data showed Wednesday.

A Bloomberg Intelligence analysis of Asian fiscal data shows that Malaysia's government revenue growth, while hurt by lower crude prices, is still outpacing the increase in state spending after adjusting for inflation.

"It looks like they tightened spending in anticipation of the hit to revenues from the oil and gas sector - perhaps even by a tad more than they needed to," said Tamara Henderson, an economist with Bloomberg Intelligence who analyzes the data in the Asia Fiscal Monitor.

The nation's 10-year government bonds rose this week, with the yield falling four basis points, or 0.04 percentage point, to 3.85 per cent, data compiled by Bloomberg show.

BLOOMBERG