Open AccessImpact of exchange rate and oil price on the yield of sovereign bond and sukuk: Evidence from Malaysian capital market
Author(s) -
Huda Arshad,
Ruhaini Muda,
Ismah Osman
Publication year - 2017
Publication title -
journal of emerging economies and islamic research
Language(s) - English
Resource type - Journals
ISSN - 2289-2559
DOI - 10.24191/jeeir.v5i4.8834
Subject(s) - sukuk , yield (engineering) , exchange rate , bond , economics , capital market , monetary economics , sovereignty , bond market , finance , islamic finance , islam , philosophy , materials science , theology , politics , political science , law , metallurgy
This study analyses the impact of exchange rate and oil prices on the yield of sovereign bond and sukuk for Malaysian capital market. This study aims to ascertain the effect of weakening Malaysian Ringgit and declining of crude oil price on the fixed income investors in the emerging capital market. This study utilises daily time series data of Malaysian exchange rate, oil price and the yield of Malaysian sovereign bond and sukuk from year 2006 until 2015. The findings show that the weakening of exchange rate and oil prices contribute different impacts in the short and long run. In the short run, the exchange rate and oil prices does not have a direct relation with the yield of sovereign bond and sukuk. However, in the long run, the result reveals that there is a significant relationship between exchange rate and oil prices on the yield of sovereign bond and sukuk. It is evident that only a unidirectional causality relation is present between exchange rate and oil price towards selected yield of Malaysian sovereign bond and sukuk. This study provides numerical and empirical insights on issues relating to capital market that supports public authorities and private institutions on their decision and policymaking process.