Ringgit Headed for Worst Week Since June on Political Concern

Malaysia’s ringgit headed for its worst week since June on concern public support for Prime Minister Najib Razak’s government is waning, increasing the risk of policy disruptions. Government bonds retreated.

Approval rating for Najib, who must dissolve the nation’s parliament by April 28, slid to a 16-month low in December, according to a Jan. 10 statement from the Merdeka Center for Opinion Research. His administration, which has been in power since 1957, has embarked on a $444 billion, 10-year spending plan to build roads, railways and power plants to boost economic growth. Malaysian consumer prices rose 1.2 percent last month from a year earlier, the slowest pace in almost three years, according to a Jan. 23 government report.

“The uncertainty on the elections is in terms of whether the incumbent government will maintain its stronger position with the electorate,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. in Singapore. “That has shaken investor confidence a little bit.”

The ringgit declined 1.3 percent this week, the most since the five days ended June 1, to 3.0530 per dollar as of 11:04 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. The currency dropped 0.4 percent today and touched 3.0583, the weakest level since Jan. 2. One-month implied volatility, a measure of expected moves in exchange rates used to price options, held at 5.37 percent.

The yield on the 3.314 percent sovereign notes due October 2017 climbed four basis points, or 0.04 percentage point, to 3.25 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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