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Ringgit Forwards Drop Most in Five Weeks on Fed Tapering Concern

July 25 (Bloomberg) -- Ringgit forwards fell by the most in five weeks and bonds dropped after a U.S. home sales report bolstered speculation the Federal Reserve will pare stimulus.

The Malaysian Institute of Economic Research cut its 2013 estimate for economic growth to 4.8 percent from 5.6 percent today, according to a presentation given to reporters in Kuala Lumpur, joining Australia & New Zealand Banking Group Ltd. in lowering forecasts. Home purchases in the U.S. climbed 8.3 percent to an annualized rate of 497,000 in June, the highest since May 2008, data showed yesterday, spurring the biggest gain in the Bloomberg U.S. Dollar Index in almost three weeks.

“There was a bit of gain overnight on the dollar side,” said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd. in Singapore, forecasting the ringgit will trade between 3.17 and 3.22 per dollar in the spot market over the next week. “U.S. data helped the dollar.”

Twelve-month non-deliverable forwards dropped 1 percent, the largest decline since June 20, to 3.2590 per dollar as of 4:19 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. The contracts traded 1.8 percent weaker than the spot rate, which fell 0.3 percent to 3.1995.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose 60 basis points, or 0.6 percentage point, to 7.29 percent.

ANZ lowered its forecast for Malaysia’s 2013 economic growth to 4.35 percent from 5.2 percent, according to a July 23 research note.

The yield on the 3.48 percent sovereign notes due March 2023 climbed two basis points to 3.84 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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