Ringgit falls with bonds as oil-price slump weighs on finances

[KUALA LUMPUR] Malaysia's ringgit fell the most in more than a week and bonds dropped as a slump in Brent crude prices clouds the outlook for government finances in the oil-exporting nation.

Brent decreased 1.9 per cent after falling 8.5 per cent on Tuesday in its biggest decline since 2011 before US stockpiles data. The price of the commodity has halved in the past year, cutting Malaysia's export earnings and contributing to a 25 per cent slide in the ringgit. The FTSE Bursa Malaysia KLCI Index of stocks remained lower even as other Asian equities bounced back from an earlier selloff as China's Shanghai Composite Index reversed losses.

An overnight drop in emerging-market currencies and a retreat in Brent "should see Asia falling back in line with the rest of the world where risk appetite remains impaired," said Nizam Idris, the Singapore-based head of foreign-exchange and fixed-income strategy at Macquarie Bank Ltd. "Oil has been volatile." The ringgit weakened 1.3 per cent to 4.2177 a dollar as of 12:56 pm in Kuala Lumpur, the steepest decline in Asia, according to prices from local banks compiled by Bloomberg. It reached a 17-year low of 4.2990 on Aug 26. The FTSE Bursa Malaysia KLCI Index was down 0.8 per cent.

A report Tuesday showing China's official gauge of manufacturing fell to a three-year low last month fueled further concern that growth in Malaysia's biggest export market is slowing. Data on Friday may show overseas shipments from the Southeast Asian nation increased 3.2 per cent in July from a year earlier, slowing from 5 per cent the previous month, according to the median estimate in a Bloomberg survey.

The 10-year government bond yield rose four basis points to 4.28 per cent, after dropping 17 basis points on Tuesday, Bursa Malaysia prices show.

BLOOMBERG