The ringgit fell to the lowest level this week, reversing an earlier gain, after a private survey signaling a drop in China’s manufacturing dimmed the outlook for Malaysian exports. Government bonds rose.
A purchasing managers’ index for China released today by HSBC Holdings Plc and Markit Economics indicated a preliminary reading of 47.8, an 11th monthly decline. A reading below 50 indicates contraction. China was the second-largest buyer of Malaysian goods in July. Beijing should make all preparations for its territorial dispute with Japan over islands in the East China Sea, including for military conflict, Wang Xiaoxuan, director of the Naval Research Institute of the People’s Liberation Army, wrote in the China Daily newspaper today.
“The China numbers were very disappointing and I am very much pricing in a hard landing for the Chinese economy,” said Suresh Kumar Ramanathan, a currency strategist at CIMB Investment Bank Bhd. in Kuala Lumpur. “The geopolitical risks surrounding the Japanese-Chinese spat are pushing the move in the ringgit.”
The ringgit declined 0.3 percent to 3.0715 per dollar as of 4:29 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. It touched 3.0778, the weakest since Sept. 14. One-month implied volatility, a measure of exchange-rate swings used to price options, held at 6.70 percent.
Malaysia’s inflation held at 1.4 percent in August, the least in more than two years, official data showed yesterday.
Government bonds advanced. The yield on the 3.197 percent notes due October 2015 fell two basis points, or 0.02 percentage point, to 3.14 percent, according to Bursa Malaysia.