Ringgit Drops Most in a Week as Fed Seen Tapering; Bonds Advance

Malaysia’s ringgit fell the most in a week before U.S. economic data that may strengthen the case for policy makers to pare stimulus that’s fueled demand for emerging-market assets. Government bonds advanced.

Non-farm payrolls rose 180,000 in August, after increasing 162,000 in July, according to the median forecast of economists in a Bloomberg survey before a report due tomorrow. The Federal Open Market Committee meets Sept 17-18 to discuss its debt-purchase program. Malaysia’s 2013 fiscal deficit will probably be higher than the government’s estimate of 4 percent of gross domestic product even after fuel prices were increased this week, Moody’s Investors Service said Sept. 4.

“So far, incoming evidence is more supportive of taper rather than not,” said Vishnu Varathan, an economist at Mizuho Bank Ltd. in Singapore. “The risks are still tilted towards the defensive side of the play, which means emerging-market Asian currencies are going to be under pressure.”

The ringgit fell 0.5 percent, the most since Aug. 27, to 3.2996 per dollar as of 4:32 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. One-month implied volatility, a measure of expected moves in exchange rates used to price options, rose 29 basis points to 9.56 percent.

Bank Negara Malaysia will probably keep its policy rate at 3 percent today, according to all 20 economists surveyed before the decision due 6 p.m. local time.

The yield on the 3.48 percent bonds due March 2023 fell two basis points, or 0.02 percentage point, to 3.99 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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