Ringgit Forwards Approach 10-Week High as BOJ Seen Driving Flows

Malaysian ringgit forwards rose toward a 10-week high on speculation the Bank of Japan (8301)’s stimulus measures will spur inflows to emerging-market assets. Government bonds were steady.

The Nikkei 225 Stock Average climbed to its strongest in 4 1/2 years today after the BOJ said April 4 that the central bank will increase its monthly bond purchases to 7.5 trillion yen ($75.4 billion). Societe Generale SA recommends buying the ringgit in the 3.04 to 3.05 range in the short term.

“People are still expecting inflows from the BOJ’s easing,” said Choong Yin Pheng, senior manager for fixed income and economic research at Hong Leong Bank Bhd. (HLBK) in Kuala Lumpur. “There’ll be more liquidity in the system, and emerging Asia will be one of the more attractive destinations for funds.”

Twelve-month non-deliverable forwards gained 0.1 percent to 3.1129 per dollar as of 9:37 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. They earlier touched 3.1091, near the 3.1090 level reached yesterday that was the strongest since Jan. 29. Non-deliverable forwards are settled in dollars. The contracts to fix the exchange rate in a year were at a 2 percent discount to the spot rate, which rose 0.2 percent to 3.0526.

One-month implied volatility in the ringgit, a measure of expected moves in the exchange rate used to price options, fell 14 basis points, or 0.14 percentage point, to 6.69 percent.

The yield on the 3.26 percent sovereign notes due March 2018 was 3.19 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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