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Malaysia Ringgit Trades Near 11-Week Low on U.S. Budget Impasse

Malaysia’s ringgit traded near an 11-week low as speculation the U.S. will miss a year-end deadline for budget revisions deterred risk-taking.

The Treasury will create about $200 billion in headroom under the statutory debt limit that will last about two months, Secretary Timothy F. Geithner said yesterday, giving policy makers time to reach a deal to avert more than $600 billion in tax increases and spending cuts. An economic recovery in China, Malaysia’s second-largest export market, is uneven with credit conditions signaling ”this is not yet a period of strong expansion,” CBB International LLC, a New York-based researcher, said in an e-mailed summary of its China Beige Book.

“The concern over the fiscal cliff is still hanging around, which makes it hard for people to take big positions,” said Sean Yokota, the Singapore-based head of Asia strategy at Skandinaviska Enskilda Banken AB. “If things don’t get resolved by this year, the volatility will start picking up.”

The ringgit traded at 3.0665 per dollar as of 9:08 a.m. in Kuala Lumpur, after closing at 3.0676 yesterday, according to data compiled by Bloomberg. It touched 3.0720 earlier, near the 3.0788 level reached on Dec. 26 that was the lowest since Oct. 11. The currency has advanced 3.5 percent this year.

One-month implied volatility, a measure of expected moves in exchange rates used to price options, rose eight basis points, or 0.08 percentage point, to 4.6 percent. It was 8.5 percent at the end of 2011.

Government bonds were steady yesterday. The yield on the 3.492 percent notes due March 2020 held at 3.45 percent, according to Bursa Malaysia.

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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