Ringgit Heads for Best Week Since September on U.S. Budget Deal

Malaysia’s ringgit was set for its biggest weekly rise in more than three months after U.S. policy makers reached an agreement on budget revisions, bolstering demand for emerging-market assets.

The MSCI Asia Pacific Index of shares rallied 1.9 percent in the last four days after lawmakers passed a bill on Jan. 1 averting $600 billion of tax rises and spending cuts, although they may need to approve an increase in the $16.4 trillion debt ceiling as early as mid-February. Malaysian exports rose 2.1 percent in November, compared with a 3.2 percent decline the month before, according to the median estimate in a Bloomberg survey before data due Jan. 9.

“The resolution of the fiscal cliff issue helped partly to remove concerns about a global slowdown but it’s not a permanent solution,” said Andy Ji, a Singapore-based foreign-exchange strategist at Commonwealth Bank of Australia.

The ringgit climbed 0.7 percent this week, the most since the five-day period ended Sept. 14, to 3.0418 per dollar as of 9:25 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. The currency declined 0.2 percent today after the Federal Reserve said it would likely end its $85 billion monthly bond purchases in 2013. The ringgit will trade between 2.95 and 3.15 in 2013, according to a report from Malaysian Rating Corp. released yesterday.

“If the Fed unwinds the bond purchases, growth will be slightly slower than expected,” said Enrico Tanuwidjaja, a Singapore-based economist at Royal Bank of Scotland Group Plc.

One-month implied volatility for the ringgit, a measure of expected moves in exchange rates used to price options, rose 23 basis points, or 0.23 percentage point, to 5.16 percent.

Government bonds advanced this week. The yield on the 3.314 percent notes due October 2017 dropped five basis points to 3.20 percent, according to Bursa Malaysia. The yield climbed one basis point today.

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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