Ringgit Volatility Rises for Sixth Day on Ukraine Tensions, Fed

A measure of expected swings in Malaysia’s ringgit rose for a sixth day as escalating tensions in Ukraine and concern the Federal Reserve will increase interest rates damped demand for riskier assets.

The ringgit weakened as the leaders of Russia and Ukraine prepare to meet for peace talks tomorrow after the North Atlantic Treaty Organization expressed alarm over the weekend at a buildup of troops. Slack remains in the U.S. labor market, though interest rates could be raised sooner than expected, Fed Chair Janet Yellen said Aug. 22 in Jackson Hole, Wyoming.

“There are renewed concerns in Ukraine and that could be the key reason for the dollar strengthening against the ringgit,” said Ho Woei Chen, an economist at United Overseas Bank Ltd. in Singapore. “There are no new insights into the timeline for the Fed’s eventual rate normalization cycle.”

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose 15 basis points to 5.90 percent as of 5:06 p.m. in Kuala Lumpur, the highest since Aug. 12, data compiled by Bloomberg show. The ringgit retreated 0.1 percent to 3.1630 per dollar.

Nomura Holdings Inc. is optimistic about Malaysia’s export outlook and sees the nation’s central bank increasing its policy rate by 25 basis points on Sept. 18, Singapore-based economist Euben Paracuelles wrote in an Aug. 22 research note.

An Aug. 15 report showed Malaysia’s economy grew 6.4 percent in the second quarter from a year earlier, the fastest pace in more than a year and exceeding the 5.8 percent median estimate of economists surveyed by Bloomberg.

The yield on Malaysia’s 4.181 percent sovereign bonds due July 2024 rose one basis point, or 0.01 percentage point, to 3.97 percent, the highest since July 15, 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 editors responsible for this story: James Regan at jregan19@bloomberg.net Amit Prakash, Anil Varma

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