Malaysia's Ringgit Gains as Oil Slump Eases Inflation Concerns

By David Yong

July 9 (Bloomberg) -- Malaysia's ringgit gained by the most in three weeks on optimism a decline in crude oil prices will ease the pressure on inflation, boosting the appetite for local- currency assets.

The ringgit's five-day winning run is the longest since Feb. 27 as six of Asia's 10 most-traded currencies rose against the U.S. currency. Crude oil fell by 3.8 percent yesterday to $136 a barrel, the most since the end of March. Traders raised bets the ringgit's appreciation will quicken in 12 months, according to non-deliverable forward contracts.

``Lower oil prices are a big support for the ringgit and there's some confidence coming back in the forward market,'' said Awaluddin Shariff, a currency trader at EON Bank Bhd. in Kuala Lumpur. ``The market is also seeing some official support'' from central-bank buying, he said.

The ringgit climbed to 3.2480 per dollar as of 9:06 a.m. in Kuala Lumpur versus 3.2615 late yesterday, according to data compiled by Bloomberg. The currency may trade between 3.24 and 3.26 today, Awaluddin said.

Crude oil for August delivery fell 0.2 percent today to $135.78 a barrel on the New York Mercantile Exchange, adding to a 7 percent decline from a record $145.85 on July 3. Malaysia's inflation likely reached a nine-year high of 5 percent in June after the government raised fuel prices on June 5, Bank Negara Malaysia said last month.

Traders bet the ringgit will advance to 3.2360 over the next 12 months, according to non-deliverable forwards contracts, versus 3.2610 a week ago, according to data compiled by Bloomberg. The contracts are agreements in which assets are bought and sold at current prices for future delivery.

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net.