Ringgit Advances as ECB Bond-Buying Plan Bolsters Risk Appetite

Malaysia’s ringgit climbed, approaching a one-week high, after the European Central Bank unveiled a bond-buying plan to tackle the region’s debt crisis, boosting demand for riskier assets.

Policy makers agreed to make unlimited purchases to regain control of interest rates in the euro area and “address severe distortions in government bond markets,” ECB President Mario Draghi said in Frankfurt yesterday. Domestic demand will support Malaysia’s economy as the global outlook weakens, the central bank said in statement yesterday after a policy review which kept the benchmark rate at 3 percent.

“The ringgit’s strength is mainly due to the ECB’s plan,” said Choong Yin Pheng, senior manager for fixed income and economic research at Hong Leong Bank Bhd. (HLBK) in Kuala Lumpur. “It helps to ease concerns about a break-up of the euro.”

The ringgit gained 0.3 percent today and this week to 3.1081 per dollar as of 4:09 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. One-month implied volatility, a measure of exchange-rate swings used to price options, fell 30 basis points to a two-week low of 6.6 percent today. It dropped 65 basis points this week.

Exports unexpectedly fell 1.9 percent in July from a year earlier, after climbing 5.4 percent in June, according to a Trade Ministry statement today. The median of 22 estimates in a Bloomberg News survey was for a 3.5 percent increase.

Government bonds declined. The yield on the 3.314 percent notes due October 2017 rose four basis points, or 0.04 percentage point, to 3.34 percent, the highest since Aug. 17, according to Bursa Malaysia. For the week, the rate gained six basis points.

To contact the reporter on this story: Liau Y-Sing in Kuala Lumpur at yliau@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net.

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