Malaysia’s Ringgit Drops Most Since May on Europe Debt Concern

Malaysia’s ringgit weakened the most in more than five months on concern European leaders will struggle to raise funds to contain the region’s debt crisis.

The currency fell along with the MSCI Asia Pacific Index of stocks after Greek Prime Minister George Papandreou said yesterday he will put the European Union’s new deal on financing for Greece to a referendum. Overseas funds trimmed holdings of Malaysian local-currency debt by 10 percent in September from a month earlier, central bank data show.

“It’s the concern over the European debt crisis that’s weighing on the market,” said Akira Banno, a treasury adviser at Bank of Tokyo-Mitsubishi UFJ in Kuala Lumpur. “The trend for the Malaysian currency is weak today.”

The ringgit slumped 1.5 percent to 3.1195 per dollar as of 5:13 p.m. Kuala Lumpur, according to data compiled by Bloomberg. The currency dropped 1.6 percent on May 16.

The value of ringgit-denominated debt held by global funds dropped to 167.3 billion ringgit ($54 billion) from 186 billion ringgit in August and an all-time high of 186.5 billion ringgit reached in July, Bank Negara Malaysia said on its website. That’s the second reduction since November. Their holdings of government bonds decreased 6.1 percent to 92.7 billion ringgit, the figures showed.

Malaysia’s government bonds advanced. The yield on the 4.262 percent notes due September 2016 decreased three basis points, or 0.03 percentage point, to 3.32 percent, according to Bursa Malaysia.

To contact the reporter on this story: Elffie Chew in Kuala Lumpur at echew16@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net

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