Ringgit heads for best month since 1998 as oil brightens outlook

[KUALA LUMPUR] Malaysia's ringgit was poised for its biggest monthly gain since the Asian financial crisis as a rally in crude prices brightened the prospects for the region's only major net oil exporter.

The ringgit led the advance in Southeast Asian currencies in March as global funds returned to emerging markets after the Federal Reserve signaled a gradual approach to raising US interest rates.

Brent crude extended a recovery from a 12-year low reached in January, auguring well for a nation that derives 22 per cent of government revenue from oil-related sources.

"A dovish Fed, supportive oil prices, stabilizing market sentiment and decent interest in local currency bonds" spurred the ringgit's gains this month, said Christopher Wong, foreign-exchange strategist at Malayan Banking Bhd in Singapore.

The ringgit strengthened 0.6 per cent on Wednesday and 5.8 per cent in March to 3.9715 a dollar as of 9.35 am in Kuala Lumpur, according to prices from local banks compiled by Bloomberg.

The currency is set for its biggest monthly advance since September 1998.

Overseas investors are returning to Malaysian assets after a 35 per cent slump in Brent crude last year spurred the ringgit's biggest annual loss since 1997.

The yield on 10-year government bonds declined nine basis points this month to 3.85 per cent and was little changed on Wednesday.

The benchmark equities gauge has advanced 4.2 per cent in March, and is up 1.8 per cent for the year as global funds bought 4.45 billion ringgit (S$1.52 billion) of the nation's stocks in 2016 after 19.5 billion ringgit of outflows last year, according to data from MIDF Investment Bank.

BLOOMBERG