Ringgit Set for Monthly Loss as Europe Debt Concern Saps Demand

Malaysia’s ringgit was headed for its second biggest monthly loss this year as Europe’s lingering debt crisis sapped demand for higher-yielding assets.

The MSCI Asia-Pacific Index (MXAP) of stocks fell today, snapping a two-day rally, on concern Europe’s effort to expand its bailout fund will fall short of the region’s needs. Euro-area finance ministers approved enhancements to their bailout fund, while backing off setting a target for how much firepower they plan to muster.

“Europe is under pressure to resolve its debt problem and that is still weighing on sentiment,” said Akira Banno, a treasury adviser at Bank of Tokyo-Mitsubishi UFJ Bhd. in Kuala Lumpur. “Without clear direction, the ringgit will likely trade within the 3.16 to 3.19 range to the dollar this week.”

The ringgit weakened 3.2 percent this month and 0.3 percent today to 3.1760 per dollar as of 4:29 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. The currency fell 7 percent in September, the most this year.

Malaysia’s gross domestic product rose 5.8 percent in the three months through September from a year earlier after expanding a revised 4.3 percent in the previous quarter, the central bank said in a statement in Kuala Lumpur on Nov. 18.

Inflation may remain relatively stable for the rest of the year and moderate in 2012, central bank Governor Zeti Akhtar Aziz said in Kuala Lumpur on Nov. 18. Bank Negara Malaysia kept its overnight policy rate unchanged at 3 percent on Nov. 11 even as Indonesia and Australia lowered interest rates this month.

Five-year Malaysian government bonds rose this month. The yield on the 4.262 percent notes due September 2016 decreased five basis points, or 0.05 percentage points, to 3.30 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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