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Ringgit Falls to Seven-Month Low as Cyprus Tax Cuts Risk-Taking

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March 18 (Bloomberg) -- Malaysia’s ringgit fell to a seven-month low and government bonds advanced after Cyprus imposed a tax on bank deposits, spurring concern Europe’s debt crisis will worsen and damping demand for riskier assets.

Euro-area finance ministers agreed on March 16 to an unprecedented levy on Cypriot deposits as officials unveiled a 10 billion-euro ($13 billion) rescue plan for the country. Malaysian inflation probably quickened to 1.5 percent in February from 1.3 percent the previous month, according to the median estimate of economists in a Bloomberg survey before official figures due March 20.

“The market’s move is a function of the Cyprus development,” said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd. in Singapore. “People are a bit cautious.”

The ringgit retreated 0.3 percent, its third day of decline, to 3.1316 per dollar as of 4:12 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. It touched 3.1395, the weakest level since Aug. 15. One-month implied volatility, a measure of expected moves in exchange rates used to price options, rose 44 basis points, the most since Jan. 31, to 7.27 percent.

The yield on the 3.26 percent bonds due March 2018 declined one basis point, or 0.01 percentage point, to 3.23 percent, according to data compiled by Bloomberg.

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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