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Ringgit Falls on Speculation Fed Review Will Boost Dollar Demand

March 14 (Bloomberg) -- Malaysia’s ringgit fell to the lowest level in almost a month on speculation investors will favor the dollar over emerging-market assets after the Federal Reserve raised its assessment of the world’s largest economy.

The Dollar Index, which tracks the greenback against those of six major trading partners, climbed to an eight-week high after the Fed said in a statement yesterday that unemployment in the U.S. has “declined notably.” Malaysia’s five-year government bonds dropped for a second day.

“If the U.S. were to recover faster than expected, a lot of fund flows will go back there,” said Lam Chee Mun, a fund manager at TA Investment Management Bhd in Kuala Lumpur. “This will damp the Malaysian market.”

The ringgit declined 0.5 percent to 3.0500 per dollar as of 5:24 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. It touched 3.0563 earlier, the weakest level since February 17. One-month implied volatility, a measure of exchange-rate swings used to price options, rose 40 basis points, or 0.40 percentage point, to 7.90 percent.

The yield on the 4.262 percent notes due September 2016 rose two basis points to 3.32 percent, according to Bursa Malaysia.

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: Sandy Hendry in Hong Kong at shendry@bloomberg.net.

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