The ringgit was poised for its biggest weekly advance since 1998 and stocks rallied as surging crude oil prices brightened prospects for Malaysiaâ€™s economy.
Asian shares rose on Friday and a gauge of the dollar fell after minutes of the Federal Open Market Committeeâ€™s latest meeting indicated the US central bank wonâ€™t rush to raise interest rates.
Brent crude extended gains after rising 3.4% on Thursday. Malaysia, Asiaâ€™s only major oil exporter, derives about 22% of state revenue from the commodity.
â€œI donâ€™t think the Fed will give up hiking rates this year, but the FOMC minutes sound a little dovish to someâ€ people, said Masashi Murata, vice president at Brown Brothers Harriman & Co in Tokyo.
“The higher oil price is also supporting the ringgit.â€
The currency appreciated 2.4% to 4.1350 a dollar as of 10.07am in Kuala Lumpur, taking its gains for the week to 6.7%, according to prices from local banks compiled by Bloomberg.
It earlier climbed to 4.1213, the strongest level since Aug 21. The FTSE Bursa Malaysia KLCI Index advanced 1.1% on Friday and 5% from Oct 2, headed for the biggest weekly gain since 2008.
Negative sentiment toward emerging markets has abated since weaker-than-expected US jobs data last week tempered speculation the Fed will tighten monetary policy by year end.
Odds of a Fed liftoff in 2015 have fallen below 50%, compared with 61% a week ago, futures data show.
While Fed officials noted the US economy continues to improve, the committee decided to wait for additional data confirming the outlook for growth, the minutes showed yesterday.
Officials cited increasing risks, mainly from China, while saying they were on track to increase rates this year.
Data this week showed Malaysian exports and the trade surplus exceeded economistsâ€™ estimates.
Overseas shipments increased 4.1% in August from a year earlier while the trade gap widened to 10.2 billion ringgit (US$2.5 billion), the highest in nine months.
The median forecast of economists had been for a 1.3% gain in exports and a 4.1 billion ringgit surplus.
The ringgit still remains Asiaâ€™s worst-performing currency in 2015, with a 16% decline. Malayan Banking Bhd. cautioned against â€œcomplacent tradesâ€ in the ringgit as itâ€™s likely to remain volatile amid lingering concerns about the outlook for emerging markets, analysts led by Singapore-based Saktiandi Supaat wrote in a report Thursday.
Sovereign bonds fell this week, with the 10-year yield rising three basis points to 4.17%, according to prices from Bursa Malaysia.-Bloomberg