Ringgit falls a sixth week in longest stretch this year on oil

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(Nov 21): Malaysia’s ringgit was set for a sixth week of declines, the longest losing streak this year, as a slump in crude oil prices threatens to crimp government revenue in a nation that’s a net exporter of the fuel.

The ringgit is Southeast Asia’s worst-performing currency in the second half as Brent crude lost 28 percent since the end of June. Oil-related industries account for 30 percent of government revenue. While a weaker exchange rate helps lower export prices it makes imports more expensive. A report today may show inflation quickened to 3 percent in October from a year earlier, from 2.6 percent the previous month, according to the median forecast of economists in a Bloomberg survey.

“The drop in commodity prices, especially crude oil, is to be blamed for the ringgit weakness,” said Wong Chee Seng, a foreign-exchange strategist at AmBank Group in Kuala Lumpur. “The fact that the ringgit is a high-beta currency also didn’t help,” he said, referring to a measure of volatility.

The ringgit depreciated 0.2 percent to 3.3537 per dollar from Nov. 14 as of 10:20 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. It touched 3.3681 yesterday, the weakest level since March 2010 and has lost 4.3 percent since June 30.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options and a gauge of risk, increased 31 basis points, or 0.31 percentage point, to 7.29 percent this week.

Bonds Fall

Malaysia’s currency found support today as Brent rebounded 1 percent, adding to yesterday’s 1.3 percent increase. The ringgit appreciated 0.4 percent as the Bloomberg U.S. Dollar Spot Index, which tracks the greenback against 10 major counterparts, fell 0.2 percent.

“The ringgit has been oversold in the past few weeks,” said Nizam Idris, head of fixed-income and currency strategy at Macquarie Bank Ltd. in Singapore. “The rebound in crude oil prices and the weaker dollar are the reasons for the firmer ringgit today.”

Idris said the ringgit could gain further if the country’s inflation surprises on the upside and may outperform if crude oil prices continue to rise.

Malaysia’s 10-year government notes fell for a second week. The yield on the 4.181 percent securities maturing in July 2024 rose four basis points to 3.91 percent, data compiled by Bloomberg show. The yield dropped two basis points today.