Ringgit Forwards Set for Weekly Rise on Steady Economic Outlook

Malaysian ringgit forwards are headed for the biggest weekly gain in more than a month on optimism that Southeast Asia’s third-largest economy will sustain its growth momentum. Government bonds were steady.

Gross domestic product in 2013 may expand faster than last year’s 5.6 percent pace, driven by investment and domestic consumption, Nor Mohamed Yakcop, a minister in Prime Minister Najib Razak’s department, was quoted as saying in a Feb. 23 Business Times report. Najib, who must dissolve parliament by April 28 to call for polls, has embarked on a 10-year, $444 billion infrastructure spending plan.

“A lot of the Economic Transformation Program projects are going to kick in in a bigger way this year, so that will help to sustain investments,” said Choong Yin Pheng, senior manager for fixed income and economic research at Hong Leong Bank Bhd. (HLBK) in Kuala Lumpur. “In the short-term, people will still very much be focused on the event risk, which is the elections.”

Twelve-month non-deliverable forwards gained 0.3 percent for the week and 0.2 percent today to 3.1513 per dollar as of 9:02 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. They touched 3.1366, which was the strongest since Jan. 30. The weekly advance was the biggest since the five days ended Jan. 11. The contracts to fix an exchange rate in a year’s time were at a 1.9 percent discount to the spot rate, which was little changed at 3.0930. Non-deliverable forwards are settled in dollars.

Malaysia will tighten rules on the daily setting of a key dollar-ringgit reference rate from today in an effort to boost transparency and shield the domestic market against manipulation, according to a draft statement from the Financial Markets Association of Malaysia obtained by Bloomberg yesterday.

One-month implied volatility in the ringgit, a measure of expected moves in exchange rates used to price options, fell 17 basis points, or 0.17 percentage point, this week to 6.94 percent. It declined five basis points today.

The yield on the 3.314 percent notes due October 2017 was little changed from a week ago at 3.22 percent, according to Bursa Malaysia. The rate fell two basis points 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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