Malaysian Ringgit, Bonds Set for Weekly Decline on Taper Talk

Malaysia’s ringgit was headed for the worst run of weekly declines since 2005 and government bonds fell as signs of a strengthening U.S. economy bolstered the case for policy makers to trim stimulus.

U.S. jobless claims in the week ended Nov. 16 fell to 323,000, the least since September and lower than the median forecast in a Bloomberg survey, a report showed yesterday. Inflation in Malaysia probably accelerated to a 21-month high of 2.7 percent in October, according to the median estimate of analysts in another survey before data due today.

“The short-term outlook is negative toward emerging markets, largely due to Fed tapering speculation,” said Nik Mukharriz Muhammad, a Kuala Lumpur-based fixed-income analyst at CIMB Investment Bank Bhd., a unit of Malaysia’s second-largest lender. “You don’t really want to go too far long on bonds right now.”

The ringgit retreated 0.2 percent this week, the fifth straight decline, and fell 0.2 percent today to 3.2100 per dollar as of 11:06 a.m. in Kuala Lumpur. That’s the longest stretch of losses since November 2005. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell 43 basis points since Nov. 15 and 16 basis points today to 8.2 percent.

Tapering Concern

Citigroup Inc. is neutral on the ringgit with “tapering fears back in force,” strategists including Singapore-based Siddharth Mathur wrote in a research note yesterday.

Federal Reserve Bank of St. Louis President James Bullard, a voter on policy this year who has backed record stimulus, said a strong jobs report could increase the probability of tapering in December. The Fed will delay the first cut to its bond buying program until March, according to the median estimate of 32 economists in a Bloomberg News survey conducted Nov. 8.

The yield on Malaysia’s five-year sovereign bonds rose nine basis points, or 0.09 percentage point, this week to 3.65 percent, the highest level since Sept. 2, according to data compiled by Bloomberg. The rate was little changed today. The yield on the 3.48 percent securities maturing March 2023 advanced 18 basis points since Nov. 15 to 4.11 percent, the highest since July 31. It climbed four basis points today.

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: Amit Prakash at aprakash1@bloomberg.net

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