Ringgit Strengthens on Optimism Europe Will Contain Debt Crisis

Malaysia’s ringgit rebounded from the weakest level in eight weeks as optimism European leaders will contain the region’s debt crisis boosted sentiment toward emerging-market assets.

The European Financial Stability Facility may insure bonds of troubled countries with guarantees of between 20 percent and 30 percent, according to guidelines to be considered by finance ministers this week. Foreign direct investment into Malaysia rose 42 percent in first nine months of this year, Trade Minister Mustapa Mohamed said in a statement today.

“Investors are trading on headlines, and the driver is Europe,” said Azmi Shukri Rahman, a foreign-exchange trader at CIMB Investment Bank Bhd. in Kuala Lumpur. “Trading on the ringgit will continue to be volatile.”

The ringgit strengthened 0.8 percent from Nov. 25 to 3.1740 per dollar as of 4:03 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. Malaysia’s financial markets were closed for a holiday yesterday. The currency touched 3.2019 on Nov. 25, the weakest level since Oct. 4.

Five-year Malaysian government bonds rose after the treasury sold 3 billion ringgit ($944 million) of debt maturing in September 2016 to yield 3.303 percent today, according to the central bank’s website.

The yield on the 4.262 percent notes due September 2016 decreased one basis point, or 0.01 percentage point, to 3.3 percent, according to Bursa Malaysia.

To contact the reporter responsible for 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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