The Malaysian ringgit led gains among emerging Asian currencies on Tuesday 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 $2.3 billion in assets. Other regional units rose as the 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 percent to 4.2580 per dollar. 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 percent loss against the 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. The Taiwan dollar advanced as foreign investors continued to buy local stocks. Foreigners were net buyers in the previous three consecutive sessions, absorbing a combined net T$6.9 billion ($212.1 million) worth of equities, Taiwan Stock Exchange data showed.
Taiwan's central bank was not spotted intervening on Tuesday to stem strength in the best-performing emerging Asian currency so far this year, traders said. Authorities did not intervene in the Taiwan dollar's opening price for a second straight day, indicating the central bank may be comfortable with the currency's current levels, traders added. The central bank usually steps into the local currency market to curb volatility, especially when trade opens and closes, according to traders. South Korea's won rose as exporters bought it for month-end settlements. Offshore funds also purchased the won to cut dollar holdings, prompting stop-loss selling in the greenback, traders said.