Ringgit hits 4-week low as inflation, oil dim prospects

The ringgit fell to a four-week low as its oil-related losses were exacerbated by forecasts Malaysia's inflation quickened to the fastest in seven years. The currency led a drop in emerging markets on Wednesday as the commodity resumed declines, dimming the outlook for Malaysia's finances as a net oil exporter. General risk-off sentiment didn't help as Asian equities joined a global selloff. Consumer-price gains estimated at 3.7% from a year earlier in January would be the highest since 2009 and would almost wipe out the interest paid on the nation's bonds maturing in less than a decade. "Inflation above market expectations could encourage outflows from the currency and bond markets because real returns would be unattractive," said Khoon Goh, a senior foreign-exchange strategist at Australia & New Zealand Banking Group Ltd in Singapore. "CPI data will be closely watched as a high print means Bank Negara Malaysia's hands in delivering easing are tied." The currency weakened 1.2% to 4.2443 a dollar as of 10.41am in Kuala Lumpur and touched 4.2467, the lowest since January 28, according to prices from local banks compiled by Bloomberg. Brent crude added to Tuesday's 4.1% drop, causing the ringgit to give up its 0.3% gain in the past two days. The FTSE Bursa Malaysia KLCI Index of shares fell 0.3%. Ten-year government bonds declined for a fourth day, with the yield rising one basis point to 3.94%, prices from Bursa Malaysia show. Notes due in 2023 pay 3.78% and those maturing in 2020 3.4%. The Southeast Asian nation derives 22% of its revenue from oil-related sources and the government has said it risks losing RM300 million for every US$1 drop in the commodity. The central bank has kept its benchmark overnight policy rate at 3.25% since July 2014 and the government projects gross domestic product growth will slow to 4% to 4.5% this year, from 5% in 2015. – Bloomberg, February 24, 2016.]]>