Malaysia’s ringgit fell to a 10-month low and the five-year government bond yield climbed to the highest in three months as investors await clues as to when U.S. policy makers will start reducing monetary stimulus.
Federal Reserve Chairman Ben S. Bernanke will speak to reporters at the end of the Fed’s two-day meeting today. He signaled May 22 that debt purchases could be pared if the jobs market shows sustainable improvement. Foreign investors hold 31.7 percent of outstanding Malaysian fixed-income securities, compared with 34.8 percent for Indonesia and 18.9 percent for Thailand, according to a June 10 report from BNP Paribas SA.
“The biggest concern in Malaysia is the very large holdings of Malaysian bonds by the offshore community,” said Rob Ryan, a currency strategist at Royal Bank of Scotland Plc in Singapore. “Ahead of the Fed, I don’t think the ringgit has too far to go today.”
The ringgit dropped 0.4 percent to 3.1645 per dollar as of 10:07 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. It touched 3.1680 today, the lowest level since July 26, and has weakened 4.8 percent since May 22. One-month implied volatility, a measure of expected moves in exchange rates used to price options, fell one basis point, or 0.01 percentage point, to 9.20 percent.
The currency may appreciate to 3.07 per dollar by year-end, although any tapering of Fed stimulus is likely to impact the country, David Fernandez, Singapore-based head of research for emerging Asia at JPMorgan Chase Bank, said at a Bloomberg Link event in London yesterday.
Malaysian inflation probably held at an 11-month high of 1.7 percent in May, according to the median forecast of economists in a Bloomberg survey ahead of a government report due today.
The yield on the 3.26 percent notes due March 2018 advanced two basis points to 3.30 percent, the highest since the bonds were sold in March, according to data compiled by Bloomberg.
To contact the reporter on this story: Liau Y-Sing in Kuala Lumpur at firstname.lastname@example.org