Malaysia’s Ringgit Declines Ahead of Economic Data

(Corrects first paragraph to show Malaysia’s inflation rate is forecast to stay at the lowest level in two years and time of GDP data release in second paragraph.)

Malaysia’s ringgit fell before data forecast to show Southeast Asia’s third-largest economy grew at the slowest pace in a year and inflation held at a two-year low.

Gross domestic product increased 4.6 percent in the second quarter from a year earlier, compared with 4.7 percent in the previous three months, according to median estimate of economists in a Bloomberg News survey before an official report due at 5 p.m. local time. Consumer prices rose 1.6 percent in July, unchanged from June, a separate survey showed.

“People are reluctant to take heavy positions ahead of the GDP data, which could signal downside risk to growth,” said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd. (MAY) in Singapore. “The Malaysian currency will likely trade in a tight range this week against the dollar.”

The ringgit declined 0.1 percent to 3.1226 per dollar as of 8:56 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. One-month implied volatility, a measure of exchange- rate swings used to price options, dropped 10 basis points, or 0.1 percentage point, to 6.22 percent, the lowest since July 18.

The currency will be cushioned against external weakness by Malaysia’s current-account surplus, Credit Agricole CIB said in a report today. The surplus as a percentage of GDP is the second-largest in Asia, according to the report.

Five-year government bonds declined yesterday after the treasury sold 4 billion ringgit ($1.3 billion) of the debt at an average yield of 3.27 percent. The yield on the 3.314 percent notes due October 2017 surged eight basis points to 3.32 percent, the highest level since May 10, 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: James Regan at jregan19@bloomberg.net.

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