Ringgit Falls Most in Three Weeks After Rally as Dollars Bought

The ringgit fell the most in three weeks on speculation some investors are buying dollars to take advantage of a favorable exchange rate after the Malaysian currency touched a four-month high yesterday.

The ringgit declined 0.5 percent to 3.2375 per dollar as of 9:34 a.m. in Kuala Lumpur after rallying 1.9 percent over the previous five days, data compiled by Bloomberg show. That pared its weekly gain to 1.3 percent, still on course for its biggest five-day advance since October.

The dollar’s 14-day relative strength index against the ringgit was 31 yesterday, near the 30 threshold that signals to some traders that the U.S. currency will rebound. The MSCI Asia Pacific Index of shares slid 1 percent today after the Nasdaq Composite gauge in the U.S. plunged 3.1 percent yesterday, the most since 2011.

“The ringgit has had a great few sessions,” said Jonathan Cavenagh, a Singapore-based currency strategist at Westpac Banking Corp. “That’s definitely seeing a little bit of profit-taking. There are concerns around what’s happening with broader U.S. equity market sentiment, and is that going to spill over to emerging markets in Asia.”

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell four basis points, or 0.04 percentage point, to 6.48 percent. It has dropped 21 basis points since April 4.

Industrial Production

Malaysian industrial production rose 6.7 percent in February from a year earlier, the fastest pace since July and exceeding the median forecast of economists for a 6.2 percent gain, according to a government report yesterday.

Southeast Asia’s third-biggest economy will expand 5.2 percent this year and 5 percent in 2015, the International Monetary Fund said in its World Economic Outlook on April 8. Gross domestic product increased 4.7 percent in 2013.

Nomura Holdings Inc. predicts Bank Negara Malaysia will deliver 50 basis points of interest-rate increases in the second half of the year, amid prospects of quickening inflation, according to a report published yesterday. The central bank has held the policy rate at 3 percent since May 2011 even as consumer-price gains advanced to a 32-month high of 3.5 percent in February.

The yield on Malaysia’s 4.181 percent sovereign bonds due July 2024 was steady at 4.09 percent. The yield fell five basis points this week, the biggest drop since the period ended Feb. 7, data compiled by Bloomberg show.

To contact the reporter on this story: Liau Y-Sing in Kuala Lumpur at yliau@bloomberg.net

To contact the editors responsible for this story: James Regan at jregan19@bloomberg.net Andrew Janes, Amit Prakash

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