Ringgit Has Best Weekly Gain in a Month on U.S. Budget Agreement

Malaysia’s ringgit had its biggest weekly gain in more than a month after U.S. policy makers reached a deal on budget revisions, bolstering demand for emerging-market assets. Government bonds climbed.

The MSCI Asia Pacific Index of shares rallied 1.8 percent in the last four days after lawmakers passed a bill on Jan. 1 averting $600 billion of tax rises and spending cuts, although they may need to approve an increase in the $16.4 trillion debt ceiling as early as mid-February. Malaysian exports rose 2.1 percent in November, compared with a 3.2 percent decline the month before, according to the median estimate in a Bloomberg survey before data due Jan. 9.

“The resolution of the fiscal cliff issue helped partly to remove concerns about a global slowdown but it’s not a permanent solution,” said Andy Ji, a Singapore-based foreign-exchange strategist at Commonwealth Bank of Australia.

The ringgit climbed 0.5 percent this week, the most since the five-day period ended Nov. 30, to 3.0483 per dollar as of 4:04 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. One-month implied volatility, a measure of expected moves in exchange rates used to price options, rose 22 basis points, or 0.22 percentage point, today to 5.16 percent.

The local currency declined 0.4 percent today after minutes of the Federal Reserve’s last meeting, released yesterday, showed U.S. policy makers expect to end their $85 billion monthly bond purchases in 2013. The ringgit will trade between 2.95 and 3.15 in 2013, according to a report from Malaysian Rating Corp. released yesterday.

“If the Fed unwinds the bond purchases, growth will be slightly slower than expected,” said Enrico Tanuwidjaja, a Singapore-based economist at Royal Bank of Scotland Group Plc.

The yield on the 3.314 percent notes due October 2017 dropped two basis points this week to 3.23 percent, according to Bursa Malaysia. The yield climbed four basis points today.

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