(Dec 1): Malaysia’s ringgit headed for its biggest two-day decline since the 1997-98 Asian financial crisis and stocks slumped on concern a protracted slide in crude will erode the oil-exporting nation’s revenue.

The currency weakened 1.6 percent to 3.4385 per dollar as of 11:53 a.m. in Kuala Lumpur, the lowest level since February 2010, according to data compiled by Bloomberg. The ringgit has dropped 2.7 percent in two days, the steepest decline since June 1998. The benchmark FTSE Bursa Malaysia KLCI Index of shares fell 2.1 percent in the worst one-day performance in 22 months.

The ringgit led losses in emerging markets as Brent slid to the lowest level in almost five years after OPEC’s decision last week not to cut production to shore up prices, which have slumped 41 percent from a June high. The potential revenue loss may make it harder for Prime Minister Najib Razak to lower the fiscal deficit to 3 percent of gross domestic product next year from 3.5 percent.

“Malaysia is probably most affected by oil prices in the Asian space,” said Andy Ji, a Singapore-based strategist at Commonwealth Bank of Australia. “The ringgit could fall to 3.45 this week.”

A 1997 devaluation of the Thai baht triggered the Asia financial crisis and prompted Malaysia’s government to adopt a pegged exchange rate to the dollar in 1998. The ringgit was fixed at 3.8 until the policy was scrapped in 2005.

The currency dropped to 3.4385 earlier, the lowest level since February 2010, when it last traded at 3.45 and went on to reach 3.4545 on the 5th of that month, data compiled by Bloomberg show.

Stocks Fall

Oil-related industries account for a third of Malaysian state revenue and each 10 percent decline in crude will worsen the nation’s fiscal shortfall by 0.2 percent of GDP, Chua Hak Bin, a Bank of America Merrill Lynch economist in Singapore, wrote in an Oct. 22 report.

The FTSE Bursa Malaysia Index was dragged down by oil, gas and plantation stocks. The gauge has dropped 6 percent from its 2014 high in July.

SapuraKencana Petroleum Bhd., Malaysia’s biggest listed oil and gas services company by market value, fell 11 percent, the most on record. Dialog Group Bhd., a contractor in the same industry, dropped 19 percent in the steepest decline since November 1997.

“We are watching the stocks closely,” said Gerald Ambrose, who oversees the equivalent of $3.6 billion as managing director at Aberdeen Asset Management Sdn. in Kuala Lumpur. “There are a lot of oil and gas companies that meet our quality and criteria but there was no upside previously. Now prices are falling.”

Bonds, Exports

Malaysia is already seeing a deterioration in its terms of trade. The current-account surplus narrowed to 7.6 billion ringgit ($2.2 billion) in the third quarter, the smallest gap since June 2013. A Dec. 5 report may show the nation’s exports rose 0.2 percent in October from a year earlier, according to the median estimate in a Bloomberg survey. That would be the smallest increase since a contraction in June 2013.

The nation’s sovereign bonds fell. The yield on the 4.181 percent notes due 2024 rose four basis points, or 0.04 percentage point, to 3.90 percent, data compiled by Bloomberg show. That’s the highest since Nov. 20. The three-year bond yield climbed four basis points to 3.63 percent, the highest since the debt was sold in March.

“Hopes for Malaysia have rested on the fiscal consolidation story,” said Tim Condon, head of Asian research at ING Groep NV in Singapore. “Markets need to be re-priced for diminished hopes on that front.”