Ringgit Forwards Strengthen for Third Day on Fed Stimulus Pledge

Malaysian ringgit forwards gained for a third day after the Federal Reserve said it would maintain its stimulus policy, bolstering demand for emerging-market assets. Government bonds were little changed.

Further gains in the U.S. labor market are needed for the central bank to consider reducing its $85 billion a month of asset purchases, Fed Chairman Ben S. Bernanke said in Washington yesterday. Malaysia’s economy will probably grow 5 percent to 6 percent in 2013, after expanding 5.6 percent last year, the central bank forecast in its annual report released yesterday.

“The Fed is going to continue with its very easy policy and that’s positive,” said Jonathan Cavenagh, a currency strategist in Singapore at Westpac Banking Corp. “Bank Negara’s forecasts were still painting a fairly positive outlook.”

Twelve-month non-deliverable forwards climbed 0.1 percent to 3.1785 per dollar as of 9:23 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. The contracts to fix an exchange rate in a year’s time were at a 1.9 percent discount to the spot rate, which advanced 0.1 percent to 3.1195. 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, fell 11 basis points, or 0.11 percentage point, to 7.18 percent.

Malaysian consumer prices increased 1.5 percent in February from a year earlier, after rising 1.3 percent the previous month, official figures showed yesterday.

The yield on the 3.26 percent sovereign bonds due March 2018 was steady at 3.23 percent, according to data compiled by Bloomberg.

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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