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Ringgit Trades Near Week-High on Budget Outlook; Bonds Steady

Malaysia’s ringgit traded near a one-week high as the government rolled back subsidies for the second time in six months, boosting efforts to halve the budget deficit over the next five years.

Prime Minister Najib Razak raised retail prices for gasoline and sugar on Dec. 4 and pledged to spend more on infrastructure. Asian currencies advanced after a government report on Dec. 3 showed U.S. non-farm payrolls rose less than economists forecast, fanning speculation the Federal Reserve will keep printing dollars to support the economy. Government bonds were little changed.

“The move to trim the deficit is positive for the ringgit, given the focus on government indebtedness,” said Suresh Kumar Ramanathan, a currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. “With a weak U.S. job report, the bearish- dollar view remains intact.”

The ringgit was little changed at 3.1420 per dollar as of 4:08 p.m. in Kuala Lumpur after earlier rising as much as 0.4 percent, according to data compiled by Bloomberg. The currency has risen 9.1 percent this year, headed for its best annual gain since 1973. Local markets are closed tomorrow for a holiday.

The government will claw back 1.2 billion ringgit ($377 million) from the latest subsidy rollback, according to a statement issued by the Prime Minister’s Department. A similar move on July 16 generated about 750 million ringgit of savings.

Under a five-year plan unveiled in June, Najib aims to trim the government’s budget deficit to 2.8 percent of gross domestic product in 2015. The gap is forecast to narrow to 5.4 percent of GDP in 2011 from 5.6 percent this year.

U.S. employers added 39,000 jobs in November versus 172,000 in October, the Labor Department said on Dec. 3. Economists predicted 150,000 of additions in a Bloomberg News survey.

Bond Sales

Three-year yields were little-changed near a two-week low as traders wait for the release of Malaysia’s bond auction calendar for 2011.

The yield on the 3.21 percent note due May 2013 was at 3.13 percent, according to Bursa Malaysia. The yield declined 12 basis points, or 0.12 percentage points, in November, the most in seven months. A basis point is 0.01 percentage point.

The government’s budget shortfall will amount to 45 billion ringgit, or 5.4 percent of gross domestic product, in 2011, the finance ministry estimated in October. About 45 billion ringgit of existing government bonds will mature next year, according to Bloomberg data.

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