July 10 (Bloomberg) -- The Malaysian ringgit may extend this year's 3.9 percent advance as traders bet the central bank will permit more gains as the economy shows signs of expansion.

Among 14 investors, strategists and traders surveyed from Singapore to Seoul on July 6, nine recommended buying the ringgit. Four advised selling it and one said to hold it.

The ringgit completed a second winning week in the five days through July 7 as reports showed exports and industrial production rose in May at the fastest pace in three months. Stocks also climbed in the past three weeks as Southeast Asia's third-largest economy grew at a faster-than-expected 5.3 percent rate in the first quarter from a year earlier.

``Fundamentals are very supportive for the currency and it's going to remain that way,'' said David Mann, a foreign- exchange strategist in Hong Kong at Standard Chartered Bank Plc. ``Overall economic performance is very good and authorities in Malaysia are allowing the currency to appreciate.''

The ringgit rose 0.5 percent to 3.6378 per dollar as of 11:37 a.m. in Kuala Lumpur, according to Bloomberg data. Standard Chartered predicts the ringgit will strengthen to 3.57 this quarter and 3.52 by year-end.

Malaysia scrapped a seven-year peg of 3.80 to the dollar July 21, 2005, in favor of a managed float against a basket of undisclosed currencies of its key trading partners, the same day China revalued.

Central bank Governor Zeti Akhtar Aziz June 6 said the economy will probably expand 6 percent this year as demand for the nation's exports remains strong.

`Good Growth Story'

``The underlying trend is there, Malaysia is experiencing high quality solid growth, underlying growth, and therefore we expect this trend to continue,'' Zeti said June 9.

Portfolio investment into Malaysia, which includes stocks and government and corporate bonds, rose to 4 billion ringgit ($1.01 billion) in the first quarter, from a drop in the previous three months, according to central bank data released May 31.

A stronger currency also may be favored by the central bank because it helps combat rising prices by reducing the cost of imports, said Catherine Tan, a currency analyst at Forecast Ltd. in Singapore. The inflation rate eased in May to 3.9 percent after reaching the highest in seven years in March.

``The government is in favor of a stronger ringgit to counter inflationary pressure,'' said Tan. ``It's a good growth story for Malaysia, so they can afford a stronger currency.''

The ringgit may rise to 3.55 by year-end, she said.

`Safer Currencies'

The ringgit July 5 weakened in line with other Asian currencies as North Korea fired seven rockets, including a long-range Taepodong 2 missile that vanished after 40 seconds, increasing the security risk in the region.

Concern may escalate this week and hurt the ringgit, said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. North Korea has vowed to continue missile tests and said it doesn't have to notify the U.S., Japan and other countries about launches that are part of military training.

``The North Korean issue is creating a risk to regional security and makes it harder to buy any Asian currencies, including the ringgit,'' said Soma. ``People may want to buy safer currencies, such as the dollar and the euro.''

The ringgit may weaken to 3.68 against the dollar this week, Soma said.

Malaysia's currency has climbed since Group of Seven finance ministers and central bankers on April 21 said in Washington it is ``critical'' for countries in the region to let their currencies appreciate to reduce trade imbalances that threaten global economic growth.

Only the Indonesia rupiah, Thai baht, South Korean won and Singapore dollar have gained more than the ringgit this year of the 15 Asia-Pacific currencies tracked by Bloomberg.

The recommendation for the Malaysian ringgit was the most bullish of those surveyed by Bloomberg for seven Asian regional currencies, the South Korean won, Thai baht, Singapore dollar, Indonesia rupiah, Taiwan dollar and Philippine peso.

                          BUY       SELL     HOLD
Indonesia Rupiah            5        5        4
Taiwan Dollar               8        3        3
Philippine Peso             5        6        3
South Korean Won            4        3        7
Thai Baht                   3        6        5
Singapore Dollar            8        1        5
Malaysian Ringgit           9        4        1

To contact the reporter on this story: Jake Lee in Hong Kong jlee127@bloomberg.net; Yumi Kuramitsu in Hong Kong ykuramitsu@bloomberg.net;

Last Updated: July 9, 2006 23:39 EDT