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Ringgit Snaps Three-Day Drop as U.S. Data Seen Delaying Taper

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Oct. 23 (Bloomberg) -- Malaysia’s ringgit snapped a three-day drop after a U.S. jobs report trailed estimates, bolstering the case for the Federal Reserve to delay reducing stimulus that’s buoyed emerging-market assets. Government bonds climbed.

Employers in the world’s largest economy added 148,000 jobs in September, less than the 180,000 median forecast in a Bloomberg survey and a revised 193,000 increase in August, official data showed yesterday. Malaysia will probably announce a consumption tax in the Oct. 25 budget and is on track to meet its 2013 fiscal deficit target of 4 percent of gross domestic product, Weiwen Ng, an economist at Australia & New Zealand Banking Group Ltd. in Singapore, wrote in a report yesterday.

“The non-farm payrolls data is probably pushing out expectations of a tapering from the first to the second quarter,” said Vishnu Varathan, a senior economist at Mizuho Bank Ltd. in Singapore. “People expect positive steps on fiscal consolidation at the budget announcement this week too.”

The ringgit gained 0.2 percent to 3.1677 per dollar as of 5:15 p.m. in Kuala Lumpur, according to data compiled by Bloomberg. It has climbed 2.9 percent this month, the best performance among Asia’s 11 most-traded currencies. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, fell 15 basis points, or 0.15 percentage point, to 8.37 percent.

‘Too Timid’

Fitch Ratings cut the outlook on Malaysia’s A- ranking, the fourth-lowest investment grade, to negative in July, citing rising debt levels and a lack of budgetary reform. Prime Minister Najib Razak responded by raising fuel prices for the first time since 2010 in September and said he’d delay some public projects. The country has run annual budget shortfalls every year starting 1998.

“Recent deficit-cutting measures have been far too timid and will need to be backed up by more meaningful fiscal consolidation to meet the government’s 3 percent of GDP deficit target in 2015,” Nicholas Spiro, London-based managing director of Spiro Sovereign Strategy, said in an e-mail yesterday.

The Fed will hold off from trimming its $85 billion of monthly debt purchases until March, according to the median prediction in an Oct. 17-18 survey by Bloomberg News. Cuts were forecast for December in a similar survey a month earlier.

The yield on the 3.26 percent Malaysian sovereign bonds due March 2018 fell two basis points to 3.37 percent, the lowest level since July 8, 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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