Ringgit gains on oil rebound, 1MDB asset sale

A customer counting ringgit notes outside a money changer.
A customer counting ringgit notes outside a money changer. PHOTO: REUTERS

SINGAPORE (Reuters) - The Malaysian ringgit led gains among emerging Asian currencies on Tuesday (Nov 24) as a rebound in crude prices eased concerns over the country's falling oil and gas revenues, and as debt-ridden state fund 1MDB agreed to sell US$2.3 billion in assets.

Other regional currencies rose as the US dollar stepped back from an eight-month peak, prompting investors to cut some of their greenback holdings.

The ringgit advanced as much as 1.1 per cent to 4.2580 per US dollar. It rose 0.7 per cent against the Singapore dollar to 3.0108 as of 1:49 pm from its close on Monday of 3.0317.

Also adding support was news that 1Malaysia Development Bhd (1MDB) has agreed to sell its energy business to China General Nuclear Power Corporation, as it seeks to cut its debt and restore investor confidence in the Southeast Asian country.

"The 1MDB sale of its energy business helps contribute to stabilisation of outlook for MYR and reinforce our non-consensus view for a neutral MYR against the USD," said Heng Koon How, senior currency strategist for Credit Suisse private banking and wealth management in Singapore.

Separately, China will buy more Malaysian government bonds to help stabilise its financial markets, Premier Li Keqiang announced, according to state news agency Xinhua on Monday.

The ringgit is the worst-performing Asian currency in 2015 with an 18 per cent loss against the US dollar so far this year. An international probe into business dealings at 1MDB, along with weak global prices, has hurt sentiment in Malaysia. 1MDB has denied any wrongdoing.

Still, analysts and traders doubted how much further the ringgit could appreciate as crude prices are likely to stay under pressure from a supply glut. Malaysia is a major exporter of palm oil and liquefied natural gas, which have also seen a steep price slide.

"The news is more positive for sovereign CDS than for the MYR because the MYR is more vulnerable to falling oil prices,"said Tim Condon, head of Asia research for ING Bank in a note, referring to credit default swaps. Investors use CDS to hedge against risks of debt default.

Malaysia's five-year CDS are at 170/175 basis points, down 20 bps points this month.