Ringgit forwards fell by the most in five weeks and bonds dropped after a U.S. home sales report bolstered speculation the Federal Reserve will pare stimulus, prompting downgrades to Malaysia’s growth forecasts.
The Malaysian Institute of Economic Research cut its 2013 estimate to 4.8 percent from 5.6 percent today, according to a presentation given to reporters in Kuala Lumpur, joining Australia & New Zealand Banking Group Ltd. in lowering forecasts. Home purchases in the U.S. climbed 8.3 percent to an annualized rate of 497,000 in June, the highest level since May 2008, official data showed yesterday, spurring the biggest gain in the Bloomberg U.S. Dollar Index in almost three weeks.
“There was a bit of gain overnight on the dollar side,” said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd. in Singapore, forecasting the ringgit will trade between 3.17 and 3.22 per dollar in the spot market over the next week. “U.S. data helped the dollar.”
Twelve-month non-deliverable forwards dropped 1.1 percent, the largest decline since June 20, to 3.2613 per dollar as of 10:44 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. The contracts traded 1.9 percent weaker than the spot rate, which fell 0.3 percent to 3.2001.
One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose 13 basis points, or 0.13 percentage point, to 6.83 percent.
Australia and New Zealand Banking Group lowered its forecast for Malaysia’s 2013 economic growth to 4.35 percent from 5.2 percent, according to a July 23 research note.
The yield on the 3.172 percent sovereign notes due July 2016 climbed one basis point to 3.41 percent, adding to yesterday’s five basis-point advance, according to data compiled by Bloomberg.
To contact the reporter on this story: Liau Y-Sing in Kuala Lumpur at firstname.lastname@example.org