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Ringgit Set for Third Weekly Drop on Lower GDP Growth Forecast

March 23 (Bloomberg) -- Malaysia’s ringgit was poised for a third weekly drop after the central bank cut its growth forecast for Southeast Asia’s third-biggest economy.

Gross domestic product may rise 4 percent to 5 percent this year, Bank Negara Malaysia said on March 21, lower than a prediction of 5 percent to 6 percent the Finance Ministry made in October and an increase of 5.1 percent in 2011. A preliminary survey of manufacturing in China, Malaysia’s largest export market, showed this week that factory output may have shrunk for a fifth month in March.

“The risk for Malaysia’s economy is from external factors,” said Saktiandi Supaat, the Singapore-based head of foreign-exchange research at Malayan Banking Bhd. “If China’s economy weakens, it will affect Malaysian exports and the currency market.”

The ringgit weakened 0.5 percent this week to 3.0755 per dollar as of 4:38 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. It advanced 0.5 percent today.

One-month implied volatility, a measure of exchange-rate swings used to price options, fell 20 basis points, or 0.20 percentage point, to 7.70 percent this week. The rate was unchanged today.

Most Asian currencies advanced today, snapping a three-day drop, as the People’s Bank of China set the currency’s reference rate 0.2 percent higher at a record 6.2891 per dollar.

Five-year Malaysian government bonds fell this week. The yield on the 4.262 percent notes due September 2016 rose four basis points to 3.30 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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