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Ringgit Reverses Advance as European Crisis Deters Risk-Taking

Oct. 29 (Bloomberg) -- Malaysia’s ringgit fell, reversing an earlier gain, as concern Europe will be unable to contain its debt crisis damped demand for riskier assets.

The European Commission, the European Central Bank and the International Monetary Fund have proposed a restructuring of Greek debt that would require public-sector lenders to take heavy losses, Spiegel magazine reported, without citing the source of its information. The currency rose earlier after official data showed income at Chinese industrial companies advanced in September and U.S. third-quarter gross domestic product beat economists’ estimates.

“Things could get worse in Europe before they get better,” said Nizam Idris, head of Asian fixed income and currencies at Macquarie Bank Ltd. in Singapore. “Risk appetite is coming off slightly.”

The ringgit weakened 0.6 percent, the most since Oct. 8, to 3.0610 per dollar from Oct. 25 as of 4:16 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. Financial markets were closed on Oct. 26 for a public holiday. One-month implied volatility, a measure of exchange-rate swings used to price options, fell 25 basis points to 5.75 percent.

Net income of Chinese industrial companies rose 7.8 percent from a year earlier to 464 billion yuan ($74.3 billion), the first increase in six months, according to a report released Oct. 27 in Beijing. U.S. gross domestic product grew at a 2 percent annual rate in the third quarter, compared with the 1.8 percent gain forecast in a Bloomberg survey, official data showed Oct. 26.

“The U.S. has been a little bit positive in terms of the numbers and Chinese industrial profits showed signs things are improving,” said Choong Yin Pheng, senior manager for fixed income and economic research at Hong Leong Bank Bhd. in Kuala Lumpur.

Government bonds retreated. The yield on the 3.314 percent notes due October 2017 rose one basis point, or 0.01 percentage point, to 3.25 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: James Regan at jregan19@bloomberg.net.

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