Ringgit Forwards Fall Toward Two-Week Low as U.S. Deadline Looms

Malaysian ringgit forwards fell toward a two-week low as a deadline for U.S. spending cuts that may push the world’s largest economy into recession nears, damping demand for riskier assets.

About $85 billion of federal expenditure reductions will come into force March 1 unless President Barack Obama and Congress find a way to avert them. Malaysian Prime Minister Najib Razak may call a general election in April, the Star newspaper reported on Feb. 20, citing an unidentified official from his political party. The ruling coalition wants to restore the two-thirds parliamentary majority it lost in 2008.

“We have to find some kind of resolution for the U.S. spending cuts, so that’s what’s keeping markets on their toes,” said Andy Ji, a foreign-exchange strategist in Singapore at Commonwealth Bank of Australia. “The election issue is still hanging there.”

Twelve-month non-deliverable forwards declined 0.1 percent to 3.1631 per dollar as of 9:15 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. They touched 3.1731 on Feb. 21, the weakest level since Feb. 4. The contracts to fix an exchange rate in a year’s time traded at a 1.9 percent discount to the spot rate, which fell 0.1 percent to 3.1033. Non-deliverable forwards are settled in dollars.

One-month implied volatility in the ringgit, a measure of expected moves in exchange rates used to price options, held at 7.40 percent.

Government bonds were little changed. The yield on the 3.314 percent notes due October 2017 held at 3.22 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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