Ringgit Heads for Biggest Weekly Drop in a Month on U.S. Rates

Malaysia’s ringgit headed for its biggest weekly decline in more than a month on speculation an improving U.S. economy will prompt the Federal Reserve to bring forward its timetable for raising borrowing costs.

Growth in U.S. manufacturing and services industries topped economists’ estimates in August, data showed this week before today’s jobs figures. Higher interest rates in the world’s largest economy may push up Treasury yields and reduce the allure of emerging-market assets. A report today showed Malaysia’s trade surplus narrowed in July.

“The strengthening U.S. economy is creating expectations that U.S. rates will rise sooner rather than later,” said Jonathan Cavenagh, a Singapore-based currency strategist at Westpac Banking Corp. ‘The ringgit is sensitive to higher U.S. yields.’’

The ringgit fell 0.2 percent today and 1 percent for the week to 3.1845 per dollar as of 12:28 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose 58 basis points from Aug. 29 and 10 basis points today to 6.19 percent.

The nation’s trade surplus narrowed to 3.64 billion ringgit ($1.14 billion) in July, the smallest gap in 12 months, the government reported today. Export growth of 0.6 percent from a year earlier missed estimates, while imports unexpectedly contracted 0.7 percent.

Bonds Fall

The Bloomberg Dollar Spot Index climbed to a 13-month high after the European Central Bank’s surprise cut in its benchmark interest rates yesterday. The ringgit weakened as the stimulus measures boosted sentiment in the greenback, Cavenagh said.

Fed Chair Janet Yellen told central bankers in Jackson Hole, Wyoming, last month that U.S. policy makers may raise interest rates sooner than investors anticipate amid labor-market gains.

U.S. employers probably created 230,000 new jobs last month after taking on 209,000 workers in July, according to a Bloomberg survey.

Malaysian government bonds fell this week, with the yield on the 3.654 percent sovereign notes due October 2019 climbing five basis points, or 0.05 percentage point, to 3.74 percent, data compiled by Bloomberg show. The yield advanced two basis points today.

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 Simon Harvey, Robin Ganguly

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