Ringgit Volatility Advances to 10-Month High as Election Looms

A measure of swings in Malaysia’s ringgit rose to a 10-month high as doubts over the outcome of the May 5 elections unsettled markets. The local currency and government bonds advanced.

The gauge advanced for an 11th day and has risen more than a percentage point this week after campaigning for the polls, which Citigroup Inc. predicts will be the closest in the nation’s history, began on April 20. Prime Minister Najib Razak, whose alliance has been in power since the nation’s independence in 1957, is seeking a mandate to continue with a $444 billion economic development program.

“There’s still uncertainty on the part of markets about what the election outcome will be,” said Khoon Goh, a senior strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “Given that Malaysia has never had a change in government before, that just adds another layer of uncertainty if there were a surprise result.”

One-month implied volatility, a measure of expected moves in exchange rates used to price options, rose 18 basis points, or 0.18 percentage point, to 8.70 percent, as of 4:25 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. The gauge touched 8.94 percent, the highest level since June 15, 2012.

The ringgit gained 0.2 percent to 3.0505 per dollar, after falling 0.7 percent in the last two days, data compiled by Bloomberg show. The yield on the 3.26 percent government notes due March 2018 dropped one basis point to 3.17 percent, according to figures 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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