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Ringgit Drops as Faltering U.S. Budget Talks Damp Risk Appetite

Dec. 20 (Bloomberg) -- Malaysia’s ringgit declined and touched a one-week low as signs U.S. federal budget talks are faltering reduced demand for riskier emerging-market assets. Government bonds climbed.

President Barack Obama will veto House Speaker John Boehner’s budget proposal because it would burden the middle class, White House Communications Director Dan Pfeiffer said. Democrats and Republicans are trying to come up with a deal to avert more than $600 billion in automatic spending cuts and tax increases. Japan, Malaysia’s third-largest export market, said yesterday overseas sales fell for a sixth month in November.

“There are still a lot of uncertainties in the market on the fiscal cliff,” said Andy Ji, a Singapore-based foreign-exchange strategist at Commonwealth Bank of Australia. “We may see more dollar strength.”

The ringgit weakened 0.1 percent to 3.0555 per dollar as of 4:18 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. It earlier reached 3.0638, the lowest level since Dec. 11. The currency has advanced 3.7 percent this year.

One-month implied volatility, a measure of expected moves in exchange rates used to price options, rose five basis points, or 0.05 percentage point, to 4.45 percent. It has fallen 4.05 percentage points this year.

Inflation held at 1.3 percent in November, the same as in the previous two months and the least since February 2010, according to a government report yesterday. The median estimate of analysts surveyed by Bloomberg was 1.4 percent.

The yield on the 3.197 percent notes due October 2015 fell three basis points to 3.11 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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