Ringgit falls as oil drops and Fed tightening bets boost dollar

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KUALA LUMPUR (Mar 16): Malaysia’s ringgit fell, halting a three-day gain, as oil dropped to a six-year low and prospects of a U.S. interest-rate increase boosted the dollar.

Crude declined 1.5 percent Monday, adding to last week’s 9.6 percent slide. The losses are cutting earnings for oil- exporting Malaysia, which saw overseas shipments contract in January for only the second time since 2013.

The Federal Open Market Committee meets March 17-18, with investors looking to see if policy makers will drop a pledge to be “patient” on the timing of the first rate tightening since 2006.

“With the focus on the FOMC meeting this week, where the ‘patience’ language is expected to be dropped, paving the way for a rate hike as early as June, the U.S. dollar is likely to remain bid,” said Khoon Goh, a Singapore-based strategist at Australia and New Zealand Banking Group Ltd. “Oil prices have come under renewed selling pressure.”

The ringgit weakened 0.3 percent to 3.6960 a dollar as of 9:41 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. The currency has lost 13 percent in the past six months, the worst performance in Asia, as crude prices sank and concern mounted about the ability of state investment company 1Malaysia Development Bhd. to repay its debt.

A report this week may show Malaysian consumer prices climbed 0.2 percent in February from a year earlier, after advancing 1 percent in January, the slowest pace since 2009, according to a Bloomberg survey of economists before the data on March 18.

The central bank left its key interest rate unchanged for a fourth straight meeting this month as a weak ringgit reduced the scope for easing.

Government bonds were little changed, with the yield on five-year sovereign notes at 3.67 percent, data compiled by Bloomberg show.