Malaysia’s ringgit led gains in Asia before Prime Minister Najib Abdul Razak’s Budget speech as the prospect of more monetary stimulus from the European Central Bank (ECB) buoyed emerging market assets.

Najib will unveil the government’s 2016 spending plans for South-East Asia’s third-largest economy today.

Trade Minister Mustapa Mohamed said in Parliament on Tuesday that the Budget will reveal measures to strengthen the ringgit, Asia’s worst performer this year.

The MSCI Asia Pacific Index of stocks climbed with regional currencies today as ECB president Mario Draghi suggested the euro area may need a fresh injection of stimulus by the end of the year to counter an economic slowdown.

“The ringgit is up on speculation the budget will be friendly, focusing on infrastructure and boosting consumer spending,” said Wong Chee Seng, a currency strategist at AmBank Group in Kuala Lumpur. “The ECB’s stimulus measures should drive flows to Asia.”

The ringgit strengthened 1.3 percent to 4.23 a US dollar as at 12.10pm in Kuala Lumpur, following a 3.9 percent loss in the last five trading days, according to prices from local banks compiled by Bloomberg.

It has lost 1.2 percent this week. The currency’s 17 percent slump this year has made it Asia’s worst-performing exchange rate as a slide in Brent crude prices hurt the region’s only major net oil exporter and a funding scandal linked to Najib spooked foreign investors.

Consumer prices

The budget will be “one of the most difficult,” Najib was quoted as saying in a New Straits Times report on Monday. The government aims to cut the fiscal deficit to 3.2 percent of gross domestic product this year from 3.5 percent, after amending the target from 3 percent in January as oil prices continued to slide.

Najib’s speech is due to start at 4pm local time.

Consumer prices in Malaysia rose 2.6 percent in September from a year earlier, slower than the median estimate of 2.9 percent in a Bloomberg survey and compared with a 3.1 percent increase in August, official data released today showed.

Foreign-exchange reserves climbed US$800 million (RM3.41 billion) in the two weeks to Oct 15 to US$94.1 billion, according to a Bank Negara Malaysia statement issued after markets closed yesterday.

They dropped the most since 2008 last quarter.

Malaysian sovereign bonds maturing in 2019 gained, with the yield declining two basis points to 3.62 percent, prices from Bursa Malaysia showed. The 10-year yield increased one basis point to 4.15 percent.

- Bloomberg