Ringgit Has Biggest Weekly Loss Since June on U.S. Debt Risk

Malaysia’s ringgit had its biggest weekly drop in three months as concern over U.S. budget talks that risk a government shutdown sapped demand for emerging-market assets. Government bonds fell.

The U.S. Senate plans to vote today on a bill, three days before federal spending authority runs out and as the country approaches its borrowing limit. Malaysia is seeking 14.1 billion ringgit ($4.4 billion) in extra spending this year to pay civil servants’ salaries, according to a Sept. 23 report in the local Edge newspaper.

“People are showing some concern about the U.S. debt ceiling,” said Hamish Pepper, a currency strategist at Barclays Plc in Singapore. “The market concern has moved on from the prospect of foreigners withdrawing from Malaysian government securities to the fiscal front.”

The ringgit declined 1.9 percent this week and 0.3 percent today to 3.2251 per dollar as of 4:37 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. Its five-day drop is the biggest since the period ended June 21. One-month implied volatility, a measure of expected moves in exchange rates used to price options, fell 35 basis points, or 0.35 percentage point, today to 10.22 percent.

Malaysia has run a budget shortfall since 1998 and the government estimates that the gap will be 4 percent of gross domestic product this year compared with 4.5 percent in 2012.

The ringgit and Thailand’s baht are likely to underperform the peso as the Philippines’ current-account surplus remains “solid” at around 3 percent of GDP due to steady remittances, Goldman Sachs Group Inc economist Fiona Lake wrote in a note yesterday.

Debt Sale

The yield on Malaysia’s 3.26 percent bonds due March 2018 climbed 13 basis points since Sept. 20 to 3.57 percent, according to data compiled by Bloomberg. The rate dropped one basis point today.

The government today sold 2.5 billion ringgit of notes maturing September 2043, its first 30-year debt issuance, at 4.935 percent, according to central bank data. The bid-to-cover ratio of 2.44 times compares with 1.62 for the debut 20-year Islamic notes sold by Bank Negara Malaysia last month on behalf of the treasury.

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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