Ringgit Poised for Third Weekly Decline on Fed Tapering Bets

Malaysia’s ringgit headed for a third weekly decline after U.S. data beat estimates, stoking speculation the Federal Reserve will start trimming its stimulus earlier than predicted. Bonds retreated.

The currency dropped for a third day after an official report yesterday showed the world’s biggest economy expanded 2.8 percent in the third quarter, faster than the 2 percent economists forecast. Malaysian exports climbed 5 percent in September, slower than 12.4 percent growth in the preceding month, according to the median estimate in a Bloomberg survey before data due at noon local time.

“Most Asian currencies, including the ringgit, are weakening in reaction to the positive U.S. data,” Yeah Kim Leng, chief economist at RAM Holdings Bhd. in Kuala Lumpur. “The expected slower export growth in Malaysia also doesn’t help.”

The ringgit fell 0.5 percent this week to 3.1857 per dollar as of 10:08 a.m. in Kuala Lumpur, according to data compiled by Bloomberg. The currency declined 0.1 percent today and has gained 2.3 percent this quarter.

One-month implied volatility in the ringgit, a measure of expected moves in the exchange rate used to price options, surged 131 basis points, or 1.31 percentage points, to 9.22 percent this week.

The Southeast Asian nation held its key interest rate at 3 percent yesterday. Bank Negara Malaysia’s policy statetment suggests continued dovishness, with the intention to keep borrowing costs unchanged in the first half of 2014, Lee Heng Guie, regional head of economics at CIMB Investment Bank Bhd. in Kuala Lumpur, wrote in a report today.

The yield on the government’s 3.48 percent bonds due March 2023 increased one basis point today and six basis points from Nov. 1 to 3.71 percent, according to data compiled by Bloomberg.

To contact the reporter on this story: Elffie Chew in Kuala Lumpur at echew16@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net

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