Currency Ringgit extends worst start since 2009 as oil slump hits revenue

by **Cals** Wed 13 Jan 2016, 02:40

Currency

[size=28]Ringgit extends worst start since 2009 as oil slump hits revenue

By Bloomberg / Bloomberg | January 12, 2016 : 5:25 PM MYT

KUALA LUMPUR (Jan 12): Malaysia’s ringgit extended its worst start to a year since 2009 as a slump in Brent crude clouds the outlook for Asia’s only major net oil exporter just as uncertainty over China rattles global markets.

A slide in Brent to an 11-year low has prompted Prime Minister Najib Razak to review the 2016 annual budget.Plantation Industries and Commodities Minister Douglas Uggah Embas said last week that Malaysia risks losing RM300 million (US$68 million) for every one dollar drop in oil. Moody’s Investors Service cut the nation’s credit outlook on Monday to stable from positive, citing the impact on government revenue. Sovereign bonds rose.

The currency snapped a two-day gain and fell 0.6% to 4.4085 a dollar in Kuala Lumpur, prices from local banks compiled by Bloomberg show. That took its decline in 2015 to 2.6% after last year’s 19% loss, the worst in Asia.

“Falling crude oil prices and uncertainty involving the slowdown in China are weighing on the ringgit,” said Zulkiflee Mohd. Nidzam, head of foreign-exchange and bond trading at Kuala Lumpur-based Asian Finance Bank Bhd. “If these persist, the ringgit could weaken further to 4.45 a dollar in the near term.”

Since Moody’s assigned a positive outlook in November 2013 the government has sought to improve its finances, rationalizing fuel subsidies and putting in place a goods and services tax, the ratings company said on Monday. But the impact on the balance sheet has been limited and will remain so, in part due to changes in the external environment, it said.

Bonds Rise

Malaysia’s 10-year government bond yield fell two basis points to 4.22%, according to prices from the stock exchange. The five-year yield dropped four basis points to 3.49%, the biggest decline in three weeks.

Brent crude has fallen 17% so far this year to US$30.99 a barrel in Asia Tuesday, adding to the 35% drop in 2015. The commodity last breached US$30 in 2004. The price is lower than the US$48 assumption in Najib’s 2016 budget. He aims to cut the fiscal deficit to 3.1% of gross domestic product this year from an estimated 3.2% in 2015.

The nation’s factory output growth slowed to 1.8% in November from a year earlier, the least since July 2014, the government reported on Monday. The ringgit slumped to a 17-year low of 4.48 a dollar in September.
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