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Ringgit Advances to 11-Week High After U.S. Passes Budget Bill

Jan. 2 (Bloomberg) -- Malaysia’s ringgit rose to an 11-week high after the U.S. House of Representatives passed a bill undoing income-tax increases for more than 99 percent of U.S. households, boosting appetite for riskier assets.

The 257-167 bipartisan vote breaks a yearlong impasse on averting the so-called fiscal cliff of $600 billion in automatic tax increases and spending cuts that were set to take effect yesterday. Foreign ownership of Malaysian bonds rose 2 percent to a record 226.3 billion ringgit ($74.5 billion) in November from October, according to a Dec. 31 central bank report. Government notes advanced.

“The resolution of the fiscal cliff issue is positive for the market,” said Choong Yin Pheng, senior manager for fixed income and economic research at Hong Leong Bank Bhd. in Kuala Lumpur. “Malaysia is one of the more preferred investment destinations in the region.”

The ringgit climbed 0.6 percent, the most since Oct. 25, to 3.0372 per dollar from Dec. 31 as of 4:00 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. Malaysian financial markets were shut yesterday for the New Year’s holiday. The currency touched 3.0345, which was the strongest since Oct. 18. One-month implied volatility, a measure of expected moves in exchange rates used to price options, rose 16 basis points, or 0.16 percentage point, to 4.98 percent.

The ringgit’s strength was also driven by buying of government bonds at the start of the new year, said Ahmad Zubaidi Samse, a foreign-exchange trader at Bank Muamalat Malaysia Bhd. in Kuala Lumpur.

The yield on the 3.314 percent government notes due October 2017 fell five basis points to 3.20 percent, the lowest level since Nov. 27, 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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