Ringgit Advances Most in Two Weeks as EU Makes Headway on Crisis

Malaysia’s ringgit climbed the most in two weeks after European leaders agreed to relax repayment rules for emergency loans to Spanish banks, allaying concern the region’s debt crisis will worsen.

The MSCI Asia-Pacific Index of stocks reversed an earlier loss to gain by the most in six months after a condition that governments get preferred-creditor status on crisis loans to Spain’s troubled banks was dropped. Lenders can also be recapitalized directly with funds rather than going through governments, European Union President Herman Van Rompuy said today. The ringgit also had its first quarterly loss since September 2011 after Malaysia’s exports fell for a second month in April, official data showed June 6.

“These are things that the market has voiced concern about, and they have addressed some of it,” said Philip Wee, a Singapore-based senior currency economist at DBS Group Holdings Ltd., referring to the European decision. “There’s some progress with regards to allowing the permanent bailout funds to recapitalize banks directly.”

The ringgit strengthened 0.5 percent, the most since June 15, to 3.1805 per dollar as of 4:18 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. It touched 3.1710, the strongest level since June 21. The currency’s 0.4 percent advance this week pared its monthly loss to 0.2 percent. The ringgit’s 3.6 percent decline this quarter is the second-worst performance among Asia’s 10 most-traded currencies after India’s rupee.

One-month implied volatility, a measure of exchange-rate swings used to price options, fell 37 basis points to 6.63 percent today.

Government bonds were little changed today. The yield on the 3.58 percent notes due September 2018 held at 3.37 percent, according to Bursa Malaysia. The rate fell 20 basis points, or 0.2 percentage point, this week and 18 basis points this quarter.

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