Ring­git, Philip­pine peso in the lime­light

> Rise in oil prices boosts Malaysian cur­rency to high­est level in over a week

The Sun (Malaysia) - - SUNBIZ -

SIN­GA­PORE: The ring­git yes­ter­day hit its strong­est level in more than one week thanks to higher oil prices, while in­vestors awaited the un­veil­ing of Bud­get 2017 today.

The Philip­pine peso touched a near one-month high on a bud­get sur­plus in Au­gust and after the lo­cal equity mar­ket on Wed­nes­day saw the largest in­flows in three weeks. Sen­ti­ment im­proved on hopes that Pres­i­dent Ro­drigo Duterte’s for­eign vis­its would cre­ate an in­flow of busi­ness. He is in China this week.

The ring­git gained 0.5% to 4.1700 per dol­lar at one point, its strong­est since Oct 11, as a jump in crude prices eased con­cerns over Malaysia’s oil and gas rev­enue. US crude prices on Wed­nes­day hit a 15-month peak due to a drop in US stocks and an ex­pec­ta­tion of an Or­gan­i­sa­tion of Pe­tro­leum Ex­port­ing Coun­tries-led cut in pro­duc­tion.

Prime Min­is­ter Datuk Seri Na­jib Ab­dul Razak’s 2017 bud­get, due this af­ter­noon, is ex­pected to fea­ture a raft of pop­ulist mea­sures in a bid to as­suage vot­ers un­happy with his lead­er­ship and ris­ing liv­ing costs.

That could sup­port eco­nomic growth, but any widen­ing of the fis­cal deficit at a time the econ­omy is cool­ing could risk down­grades to the coun­try’s sovereign debt.

“If the bud­get sticks to fis­cal con­sol­i­da­tion path, it will be pos­i­tive for the ring­git,” said Qi Gao, FX strate­gist for Sco­tia­bank here.

“But if that’s a pop­ulist bud­get, it will spur bond out­flows and un­der­mine the ring­git ahead of a FOMC meet­ing in De­cem­ber,” Gao said, re­fer­ring to the Fed­eral Open Mar­ket Com­mit­tee. The Fed is ex­pected to raise in­ter­est rates at the De­cem­ber meet­ing.

Most emerg­ing Asian cur­ren­cies took a breather ahead of a Euro­pean Cen­tral Bank (ECB) mon­e­tary pol­icy meet­ing late yes­ter­day.

The main fo­cus is whether ECB pres­i­dent Mario Draghi will give any in­di­ca­tions that the bank is poised to ta­per its bond pur­chase pro­gramme. The ECB may de­fer un­til De­cem­ber any changes to its as­set pur­chases, sources fa­mil­iar with the dis­cus­sion said last week.

“The ECB meet­ing and press con­fer­ence will likely fo­cus on the tone re­gard­ing ta­per­ing or ex­ten­sion of the quan­ti­ta­tive eas­ing,” said Nordea Mar­kets’ chief an­a­lyst Amy Yuan Zhuang here, re­fer­ring to quan­ti­ta­tive eas­ing.

“We won’t have any clear-cut an­swer but a sig­nal of ex­ten­sion would be Asia pos­i­tive and ta­per­ing would be neg­a­tive.”

A ta­per­ing could re­duce global liq­uid­ity, hurt­ing in­vestors’ ap­petite for higher yields in emerg­ing Asia. – Reuters

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