Ringgit Climbs to Three-Week High as Fed Taper Concern Eases

Malaysia’s ringgit rose to a three-week high and bonds gained after Federal Reserve Chairman Ben S. Bernanke said the U.S. economy still requires stimulus.

The world’s largest economy needs “highly accommodative monetary policy for the foreseeable future,” Bernanke said yesterday after the central bank released minutes of its June meeting, which showed policy makers were divided on whether to halt debt purchases that have fueled fund flows to emerging markets. Bank Negara Malaysia will keep its benchmark interest rate at 3 percent today, according to all 19 economists in a Bloomberg survey.

“The ringgit bears will take a break for a while,” said Vishnu Varathan, an economist at Mizuho Corporate Bank Ltd. in Singapore. “Bernanke temporarily eased concerns about a capital outflow from emerging markets.”

The ringgit gained 0.5 percent to 3.1628 per dollar as of 9:31 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. It touched 3.1533 earlier, the strongest level since June 19. One-month implied volatility, a measure of expected moves in exchange rates used to price options, fell 21 basis points, or 0.21 percentage point, to 8.25 percent.

Malaysian factory output probably increased 2 percent in May from a year earlier, after rising 4.7 percent in April, according to the median forecast of economists in a Bloomberg survey before a government report today.

The yield on the 3.172 percent sovereign bonds due July 2016 declined two basis points to 3.28 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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