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Ringgit Rises Most in Two Weeks as Shutdown Seen Delaying Taper

Malaysia’s ringgit gained the most in two weeks on speculation the U.S. government shutdown will delay the tapering of stimulus that has fueled gains in emerging-market assets. Government bonds advanced.

House Speaker John Boehner said yesterday President Barack Obama refused to negotiate at a meeting with top congressional leaders about the shutdown. The administration is in partial closure after lawmakers failed to agree on a budget. Global funds held 28 percent of Malaysian sovereign bonds in August, compared with 31 percent for Indonesian notes and 17 percent for Thai securities, according to official data.

“The lack of agreement on the fiscal front led to the market thinking that it will mean the third round of quantitative easing will be sustained for a bit longer,” said Nizam Idris, head of fixed income and currency strategy at Macquarie Bank Ltd. in Singapore. “There’s a lot of foreign demand for Malaysian government bonds.”

The ringgit strengthened 1 percent, the most since Sept. 19, to 3.1953 per dollar as of 5:08 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, was steady at 10.73 percent.

The currency climbed 0.8 percent in September, its first monthly gain since April, after U.S. policy makers unexpectedly refrained from reducing $85 billion of monthly bond purchases, known as quantitative easing.

Trade Surplus

Malaysian export growth probably accelerated to a 15-month high of 4.7 percent in August, while the trade surplus widened to 5.1 billion ringgit ($1.6 billion) from 2.9 billion ringgit the previous month, according to the median estimates in Bloomberg surveys of economists before data due tomorrow.

President Barack Obama summoned the top four leaders of Congress to the White House yesterday for the first high-level talks on reopening the partially shut U.S. government amid few signs of a resolution. Treasury Secretary Jacob J. Lew said the U.S. has begun final extraordinary measures that will be exhausted no later than Oct. 17 to avoid breaching its debt limit.

Malaysia’s sovereigns have gathered technical and fundamental support recently and this is likely to be sustained in the near-term, Barclays Plc analysts including Singapore-based Rohit Arora wrote in a note yesterday.

Government bonds advanced, with the yield on the 3.26 percent notes due March 2018 falling four basis points, or 0.04 percentage point, to 3.47 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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