Ringgit Weakens for Third Day on U.S. Budget Negotiation Impasse

Dec. 21 (Bloomberg) -- Malaysia’s ringgit fell for a third day as concern the U.S. will be unable to avert more than $600 billion in automatic spending cuts and tax increases damped demand for riskier assets. Government bonds were steady.

The currency touched the lowest level in more than a week after House Republican leaders canceled a planned vote yesterday on Speaker John Boehner’s plan to allow higher tax rates for annual income above $1 million. East Asia’s emerging-market economies face risks from Europe and the U.S., the World Bank said in a Dec. 19 report.

“Sentiment has turned a bit more cautious on the fiscal cliff negotiations,” said Sim Moh Siong, a currency strategist at Bank of Singapore Ltd. “When risk sentiment turns cautious, it tends to benefit the U.S. dollar.”

The ringgit declined 0.2 percent to 3.0620 per dollar as of 4:13 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. It touched 3.0641, the weakest level since Dec. 11, and has gained 3.6 percent this year. One-month implied volatility, a measure of expected moves in exchange rates used to price options, dropped three basis points to 4.42 percent and has fallen 4.08 percentage points this year.

The yield on the 3.314 percent notes due October 2017 held at 3.26 percent, according to Bursa Malaysia. The rate fell one basis point, or 0.01 percentage point, this week.

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.