SINGAPORE, Jan 7 — The ringgit pared losses after Malaysia’s trade surplus surged to a three-year high, easing pressure on a currency that’s seeing the worst start to a year since the Asian financial crisis amid a drop in oil.

The ringgit fell 0.2 per cent to 3.5647 a dollar as of 12:38 p.m. in Kuala Lumpur, data compiled by Bloomberg show. The currency earlier declined as much as 0.8 per cent to a five-year low of 3.5862. The trade gap climbed to RM11 billion in November, beating the median estimate of RM4.1 billion and the highest since October 2011.

Brent crude sank to its lowest since May 2009, cutting revenue for oil-exporting Malaysia. The nation may need to reduce spending to meet its fiscal deficit goal of 3 percent of gross domestic product this year from 3.5 per cent, Rahul Bajoria, an economist at Barclays Plc, wrote in a report. Malaysia’s economic woes are being compounded by 1Malaysia Development Bhd., the state investment firm, which reportedly failed to repay a loan of more than US$500 million (RM1.8 billion) last month.

The trade balance “helped sentiment because the market was prepared for a worse set of numbers,” said Ho Woei Chen, an economist at United Overseas Bank Ltd. in Singapore. “But in the short term, the focus is still on the 1MDB issue as well as oil prices, keeping the ringgit on a weak footing.”

Overseas shipments unexpectedly climbed 2.1 per cent, official data showed today, beating the median estimate of economists for a 0.7 per cent contraction and following October’s 3.2 per cent drop. Imports rose a less-than-forecast 0.1 per cent.

Bonds fall

One-month implied volatility in the ringgit, a measure of expected exchange-rate swings used to price options, rose 111 basis points to 9.96 per cent, the highest since October 2013. That’s more than the five-year average of 7.60 per cent, according to data compiled by Bloomberg.

The ringgit also rebounded after a large Malaysia-based corporate sold the dollar above 3.5800, according to a currency trader in Asia who asked not to be identified because he isn’t authorized to speak publicly.

Barclays cut its economic growth forecast for Malaysia to 4.5 per cent from 5.5 per cent, citing the drop in commodity prices and rising market volatility. “Policy challenges on maintaining financial and macro stability have built up substantially,” Bajoria wrote today.

1MDB has never defaulted and is a “responsible borrower,” Arul Kanda, the company’s president, said in an interview yesterday. He declined to comment on a report in the Edge Financial Daily that a 2 billion ringgit loan repayment was missed on Dec. 31. 1MDB has been given until Jan. 30 to settle the debt, which was first due on Nov. 30, the newspaper reported, citing people it didn’t identify.

Government bonds fell. The yield on the benchmark 10-year note climbed seven basis points, or 0.07 percentage point, to 4.27 per cent, according to data compiled by Bloomberg. That’s the biggest increase since Dec. 12. — Bloomberg