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The ringgit strengthened the most since 1998 as Malaysia reported its biggest trade surplus in nine months and crude oil prices climbed, while resurgent global demand for Indonesian assets helped drive the rupiah’s biggest gain in six years.

The ringgit jumped 3.5 percent to 4.2253 a dollar as of the close in Kuala Lumpur, trimming its loss for the year to 17 percent, prices from local banks compiled by Bloomberg show. The rupiah surged 3.1 percent to 13,828. Thailand’s baht was Asia’s next best performer with a 1.3 percent advance. “Positions are being reversed drastically,” said Leong Sook Mei, Southeast Asia head of global markets research at Bank of Tokyo-Mitsubishi UFJ in Singapore.

Emerging-market assets are rallying this week after disappointing U.S. jobs data on Friday prompted futures traders to almost rule out a Federal Reserve interest-rate increase in 2015. Foreign funds added $82 million to their holdings of Indonesian shares in the last two days, which if sustained would lead to the first weekly inflows since July, exchange data show. Overseas investors increased ownership of Malaysian debt in September for the first time in three months, according to central bank figures Wednesday.

"We’d always expected a turnaround for emerging currencies sooner or later, but never of this speed or scale," said Trian Fatria, treasury research analyst at state-owned PT Bank Negara Indonesia in Jakarta. "We keep revising our estimates and charts, but the rupiah has breached all its technical levels."

Ringgit and Rupiah

Malaysia’s currency, Asia’s worst performer this year along with the rupiah, is rebounding as higher Brent crude shores up revenue for the region’s only major oil exporter. The commodity rose 1.1 percent, adding to a 5.4 percent advance on Tuesday, and data on Wednesday showed the nation’s trade surplus climbed to a nine-month high in August. Futures traders are now penciling in March as the most likely timing for a U.S. rate increase.

The Bloomberg Commodity Index rose 0.5 percent on Wednesday, taking its four-day advance to 4 percent. Higher raw materials prices would also benefit Indonesia, which is the world’s biggest producer of palm oil.

An Indonesian policy package to be announced as soon as Wednesday will seek to lower fuel costs and boost bank lending, said President Joko Widodo. Bank Indonesia said last week it would start intervening in the currency forwards market to help stabilize the rupiah. The central bank has kept its benchmark interest rate at 7.5 percent since February to rein in inflation and stem declines in the rupiah.

“A stronger rupiah may give Bank Indonesia more leeway to lower rates to spur growth, which would be positive for stocks and bonds as well,” said Rangga Cipta, an economist at PT Samuel Sekuritas Indonesia in Jakarta. He said he expected the monetary authority to stay on hold this year and then cut by 50 basis points in 2016, starting in the second quarter.

Stocks Rally

Malaysian and Indonesia stocks also extended a rally. The FTSE Bursa Malaysia KLCI Index climbed 1.6 percent to the highest close since August. The Jakarta Composite Index rose 0.9 percent for a third day of gains.

“Definitely the market is taking its cue from the ringgit,” said Danny Wong Teck Meng, chief executive officer at Kuala Lumpur-based Areca Capital Sdn., which manages about $224 million in assets. “The better-than-expected trade data is an extra catalyst for the market.”

Indonesia’s 10-year sovereign bonds advanced while Malaysia’s notes were little changed. The yield on the rupiah securities fell eight basis points to a seven-week low of 8.72 percent, according to prices from the Inter Dealer Market Association. The yield has dropped 109 basis points in a six-day declining streak. The ringgit debt yield was at 4.16 percent.

In what is currently a risk-on mode, it would be the worst-performing currencies of Malaysia and Indonesia that would bounce back the most, said Mitul Kotecha, head of foreign-exchange and rates strategy for Asia at Barclays Plc in Singapore. There’s a risk that the rally won’t be sustained, he said.

“We are still in a very cautious environment for emerging-market currencies and unless there is a sharp turnaround in commodity prices or capital flows, I still think there’s going to be pressure on the ringgit and the rupiah,” said Kotecha.