Ringgit leads emerging-market gains as oil, GDP boost sentiment

[KUALA LUMPUR] The ringgit led gains in emerging markets after economic growth and the surplus in Malaysia's current account beat estimates, adding to improving sentiment linked to a recovery in oil.

Brent crude rallied for a second day, brightening the outlook for oil-exporting Malaysia's finances. The ringgit climbed the most in two weeks after data showed the economy expanded 5 per cent last year and the excess in the broadest measure of trade more than doubled in the fourth quarter from the third.

The currency was also supported by comments from the Federal Reserve Open Market Committee (FOMC), which indicated it may delay raising interest rates this year after earlier indicating four potential increases.

"The market's conclusion from all the Malaysian data is that things aren't really as bad as people were thinking," said Divya Devesh, the Singapore-based foreign-exchange strategist for Asia at Standard Chartered Plc.

"Risk sentiment in general is still fragile, which means it might be difficult for the ringgit to sustain gains."

The currency extended its advance after the economic data, rising 1.3 per cent to 4.1613 a US dollar as of 1:11 pm in Kuala Lumpur, according to prices from local banks compiled by Bloomberg.

It's proving more resilient to a 7 per cent drop in Brent prices this year, strengthening 3.2 per cent after a 19 per cent loss in 2015 that made it Asia's worst-performing currency.

The current-account surplus widened to RM11.4 billion (S$3.79 billion) in the final three months of 2015, the biggest excess in more than a year and up from RM5.1 billion in the previous quarter. It was also above the RM8.1 billion estimate in a Bloomberg survey.

Gross domestic product increased 4.5 per cent last quarter from a year earlier, beating the 4.1 per cent advance expected in a separate survey. Full-year growth came in below the 6 per cent in 2014.

"The ringgit is reflecting the move in oil prices," Irene Cheung, a Singapore-based foreign-exchange strategist at Australia & New Zealand Banking Group Ltd, said before the data was released.

"The market took the FOMC minutes to mean that the Fed is going to revise down expectations for rate hikes this year."

Ten-year government bonds rose, pushing the yield down one basis point to 3.92 per cent, according to prices from Bursa Malaysia.

BLOOMBERG