Ringgit Forwards Set for 4-Week Drop as Oil Slides, Fed in View

(Bloomberg) -- Malaysia’s ringgit forwards headed for the longest stretch of weekly losses since May as a retreat in crude prices and the prospect of a U.S. interest-rate increase sapped demand for emerging-market assets.

Brent crude has fallen 4 percent this week and touched a two-week low on Wednesday, casting a cloud over the outlook for Malaysia, the only net oil exporter among Asia’s major economies. Futures show there’s a one-in-five chance the Federal Reserve will tighten policy this month as markets weigh recent differing views from Fed officials on the need for higher borrowing costs.

“Lower oil prices are keeping the pressure on the ringgit,” said Masashi Murata, a vice president at Brown Brothers Harriman & Co. in Tokyo. “And participants seem to become more confident about Fed’s hiking rate this year, which is also depressing the ringgit.”

One-month non-deliverable contracts have fallen 0.6 percent this week to 4.1342 per dollar as of 9:49 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. The contracts were little changed Thursday. The spot rate weakened 1.4 percent from Sept. 9 and dropped 0.1 percent to 4.1265 on the day.

Sentiment towards Malaysian assets has soured ahead of an arbitration where Abu Dhabi’s sovereign wealth fund is seeking $6.5 billion from state investment company 1Malaysia Development Bhd. In the claim, which will be heard this month, the Abu Dhabi fund said 1MDB and its sole shareholder -- Malaysia’s Ministry of Finance -- haven’t performed their obligations toward International Petroleum Investment Co. PJSC.