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Ringgit Drops a Sixth Day on Concern Fed Will Taper This Year

Nov. 6 (Bloomberg) -- Malaysia’s ringgit dropped for a sixth day, the longest losing streak since February, as a U.S. services gauge that topped estimates stoked speculation the Federal Reserve will cut stimulus before year-end. Bonds fell.

The ringgit declined along with other Asian currencies after a report yesterday showed the Institute for Supply Management’s U.S. non-manufacturing index climbed to 55.4 in October from 54.4 the preceding month, more than the 54 forecast by economists in a Bloomberg survey. Readings above 50 signal expansion. Malaysia’s central bank will keep borrowing costs at 3 percent at a meeting tomorrow, according to all 18 analysts surveyed by Bloomberg.

The ringgit depreciated 0.2 percent to 3.1805 per dollar in Kuala Lumpur, according to prices from local banks compiled by Bloomberg. It dropped 0.8 percent so far this month, the third-biggest loss among Asia’s 11 most-traded currencies after the Indonesian rupiah and Indian rupee. The local market was shut for a public holiday yesterday.

“Asian currencies are pricing in higher risk of Fed tapering in December,” said Nizam Idris, head of strategy for fixed income and currencies at Macquarie Bank Ltd. in Singapore. “The ringgit is dropping more because it’s more sensitive to the dollar movement.”

One-month implied volatility in the ringgit, a measure of expected moves in the exchange rate used to price options, rose 37 basis points, or 0.37 percentage point, to 8.51 percent.

The Fed maintained its $85 billion monthly bond-buying program last month, while noting signs of “underlying strength in the broader economy.” Policy makers will hold off from trimming the debt purchases until March, according to analysts surveyed by Bloomberg Oct. 17-18. A reduction was earlier forecast for December in a similar survey a month before.

The yield on the government’s 3.172 percent notes due July 2016 was little changed at 3.17 percent, while the 10-year rate climbed one basis point to 3.68 percent, data compiled by Bloomberg show.

To contact the reporter on this story: Elffie Chew in Kuala Lumpur at echew16@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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