Offshore forwards show the ringgit may weaken another 2.7 percent in the next 12 months as Brent crude prices below a 10-year average hurt export earnings, combined with controversy over a state investment company.

Twelve-month non-deliverable forwards retreated 0.2 percent to 3.9145 a dollar as of 11:20 a.m. in Kuala Lumpur, data compiled by Bloomberg show. The contracts declined to a record 3.9608 on July 8. The onshore ringgit fell to its lowest this month since the Asian financial crisis and is the region’s worst-performing currency in 2015.

As Asia’s only major net oil exporter, a 50 percent slump in Brent crude from last year’s peak is weighing on the ringgit, just as a looming U.S. interest-rate increase may spur capital outflows. Investor sentiment has also deteriorated amid a probe into funds linked to 1Malaysia Development Bhd. that has embroiled Prime Minister Najib Razak.

“Downward pressure on oil prices, a stronger U.S. dollar on Federal Reserve rate hikes this year and ongoing local political news are all weighing on ringgit forwards,” said Khoon Goh, a strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “I expect to see a further weakening in the spot rate given the stronger U.S. dollar.”

The ringgit was little changed in onshore trading Thursday at 3.8070 a dollar, and is down 0.3 percent from July 10, according to prices from banks compiled by Bloomberg. It fell to the 1997-98 Asian crisis low of 3.8130 this month and has lost 8.2 percent in 2015. Malaysian financial markets will be shut Friday for a Muslim holiday.

Bonds Rise

Morgan Stanley, which is underweight the ringgit, says the currency, along with Indonesia’s rupiah and the Turkish lira, remains “highly vulnerable to further depreciation in light of the limited rebalancing or reform efforts,” analysts including London-based Manoj Pradhan wrote in a report Wednesday. It predicts the ringgit will depreciate to 4.0 at least by June 2016, the most bearish among 24 estimates in a Bloomberg survey.

A task force that includes the Malaysian police and the central bank is investigating allegations that funds connected to 1MDB may have ended up in Prime Minister Najib’s bank accounts, a claim he is disputing. That’s compounded the ringgit’s losses as Brent trades at $57.68 a barrel, compared with its decade average of $87.09.

Malaysia’s government bonds rose, with the 10-year yield falling one basis point to 4.04 percent, little changed from July 10, prices from Bursa Malaysia show.