Ringgit extends gains as rally in oil brightens revenue outlook

[KUALA LUMPUR] Malaysia's ringgit strengthened the most in more than a week as Brent crude rallied overnight to above US$50 a barrel, brightening the outlook for Asia's only major net oil exporter.

The ringgit gained along with other regional currencies on Wednesday as the Standard & Poor's 500 Index of US stocks climbed toward its record reached in May, with the positive sentiment rubbing off on Asian benchmarks. Brent crude has struggled to maintain breaks above US$50 and is still down by more than half from its 2014 peak, helping make Malaysia's currency one of the worst performing this year in emerging markets.

The ringgit strengthened 0.6 per cent to 4.2597 a dollar as of 10:06 am in Kuala Lumpur, the most since Oct 23, according to prices from local banks compiled by Bloomberg before the central bank meets to decide on its overnight policy rate on Thursday and Friday's export data. It gained 0.4 per cent on Tuesday.

"Higher oil prices and positive risk sentiment resulting from higher US equities fueled the ringgit's gains," said Sim Moh Siong, a foreign-exchange strategist at Bank of Singapore Ltd. "I don't think the OPR or export data will significantly drive the currency's direction. " The FTSE Bursa Malaysia KLCI Index of shares rose 0.4 per cent, adding to Tuesday's 0.8 per cent gain. While Brent crude climbed 3.6 per cent overnight to US$50.54, it was last down 0.2 per cent at US$50.46 on Wednesday.

Policy makers will keep the benchmark rate at 3.25 per cent, according to all 20 economists surveyed by Bloomberg, while exports likely increased 3.5 per cent in September from a year earlier, a fourth monthly advance.

Malaysian government bonds due March 2019 climbed, with the yield declining three basis points to 3.61 per cent, prices from Bursa Malaysia show. The 10-year yield rose one basis point to 4.15 per cent. The cost to insure the nation's sovereign debt using five-year credit-default swaps fell nine basis points on Tuesday to 182, the lowest level since Sept 18.

BLOOMBERG