Malaysia’s ringgit rallied, leading gains in Asia, as the dollar weakened on a partial U.S. government shutdown. Sovereign bonds advanced.
The U.S. administration began a partial closure at midnight in Washington for the first time in 17 years after Congress failed to break a partisan deadlock. No further negotiations were immediately planned, raising concerns about a battle to raise the nation’s debt limit to avoid a first-ever default after Oct. 17. The Bloomberg U.S. Dollar Index fell 0.2 percent.
“The dollar weakened a bit on the back of the situation out of the U.S.,” said Saktiandi Supaat, head of foreign-exchange research at Malayan Banking Bhd. in Singapore. “The debt ceiling is the bigger issue for emerging-market currencies.”
The ringgit strengthened 0.7 percent to 3.2356 per dollar as of 5:13 p.m. in Kuala Lumpur, the best performance among Asia’s 11 most-traded currencies, according to data compiled by Bloomberg. That was the biggest gain since Sept. 19. One-month implied volatility, a measure of expected moves in exchange rates used to price options, fell 20 basis points to 10.76 percent.
Foreign ownership of the Southeast Asian nation’s debt dropped 1.6 percent to 212 billion ringgit ($66 billion) in August, the third straight month of declines, Bank Negara Malaysia data showed. Global funds held 28 percent of Malaysian government bonds in August, compared with 31 percent for Indonesian notes and 17 percent for Thai securities, according to finance ministry and central bank figures.
Outflows from emerging markets are likely to be temporary as there’s still plenty of liquidity in the system, Mark Mobius, executive chairman of Templeton Emerging Markets Group in San Mateo, California, wrote on his blog today.
Malaysia’s parliament has approved 14 billion ringgit in additional government spending and the funds will be allocated to several ministries including finance, education and health, according to a report from official news service Bernama today.
The yield on the 3.26 percent Malaysian sovereign notes due March 2018 dropped three basis points, or 0.03 percentage point, to 3.57 percent, according to data compiled by Bloomberg.